UU

MARKETING MANAGEMENT
PGBM15

Analysis of Amazon’s business and marketing strategies and expansion opportunities

Arpita De Ghosh
University Of Sunderland (London Campus)
Student ID: 149154422
Word Count: 4791 (Index & Reference Include)
MBA April 2015 Intake
Workshop Teacher: Dr. Bilan
 ACKNOWLEDGEMENT

I take this opportunity to express my profound gratitude and deep regards to my guide Dr. Bilan
for his exemplary guidance, monitoring and constant encouragement throughout the course of this
report. The blessing, help and guidance given by him time to time, shall carry me a long way in
the journey of life on which I am about to embark.

-----
------Arpita De Ghosh

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Contents
1. Introduction of Marketing Management: .................................................................................4

2. Introduction to Amazon: ..........................................................................................................4

3. Marketing environment audit & opportunity/threat analysis ...................................................4

3.1. Short introduction on ecommerce: ........................................................................................... 4

3.1.1. Analysis of ecommerce models used by various companies ................................................ 5

3.2. Macro-environmental analysis of Amazon .............................................................................. 6

3.2.1. PESTEL analysis: ................................................................................................................ 6

3.2.2. PESTEL analysis for Amazon .............................................................................................. 6

3.3. Micro environmental analysis of Amazon ................................................................................ 8

3.3.1. SWOT Analysis: .................................................................................................................. 9

3.3.2. SWOT Analysis of Amazon ................................................................................................. 9

3.4. Strategic implications of business environment on Amazon ................................................. 11

3.4.1. Brand name and customer mindshare ................................................................................. 11

3.4.2. Attracting more sellers by Amazon Seller Central and Amazon FBA ............................... 11

3.4.3. Global business with huge expansion potential .................................................................. 11

4. Competitive Strategies Analysis & Evaluation ........................................................................ 11

4.1. Porter’s generic approach ....................................................................................................... 12

4.1.1. Porter’s generic approach for Amazon versus eBay .......................................................... 12

4.2. Porter’s five forces ................................................................................................................... 14

4.2.1. Porter five forces for eCommerce and implication on Amazon and eBay .......................... 15

4.3. Marketing mix as competitive edge ......................................................................................... 17

4.3.1. Marketing mix of Amazon versus eBay.............................................................................. 18

4.4. Discussion - Amazon versus eBay .......................................................................................... 19

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 4.4.1. Customer and seller value proposition(USP) of Amazon versus eBay ............................. 19

4.5. Discussion- similarities and differences ................................................................................ 19

4.5.1. Effectiveness- which is better ........................................................................................... 20

5. Product/Market Growth & Marketing Strategies ................................................................... 21

5.1. ANSOFF matrix ........................................................................................................................ 21

5.1.1. ANSOFF matrix for Amazon .............................................................................................. 21

5.2. Suggestions to improve competitiveness and sustainability .................................................. 22

5.2.1. Recommendation for increasing sustainability ................................................................... 23

5.2.2. Recommendation for increasing competitiveness ............................................................... 23

6. References: ............................................................................................................................. 25

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 1. Introduction of Marketing Management:
Marketing is a pervasive social activity of a company associated with buying or selling product
or service. Its includes advertising, pricing, distribution, communication and product
development etc. (Broadening the Concept of Marketing by Kotler & Levy)

2. Introduction to Amazon:
Amazon is an US multinational company operating in Media, ecommerce and cloud business.
Headquartered in Seattle, Washington. It was incorporated in 1994 by Jeff Bezos who is the
current CEO of the company. Its initial focus was on selling books online, but later expanded
their portfolio and started offering virtually everything online. Amazon also provides sellers a
platform to list their products on the website. Sellers can also use Amazon’s warehouse for
fulfilling their customer’s orders. Amazon now operates not only in ecommerce segment, but
also in media segment and in cloud business (Amazon Web Services). Amazon’s major
revenue comes from ecommerce, however, a third of net profit comes from the high margin cloud
business. They have a global presence and are expanding heavily in many emerging markets.
(Official Site amazon, addressed 17/06/2015).

3. Marketing environment audit & opportunity/threat

analysis
3.1. Short introduction on ecommerce:
Major advance in technology and internet accessibility has led to widespread changes in
business environment and e-commerce has become a viable and attractive option. Brick and
mortar stores used to be the only method of shopping/retail about two decades back. Companies
like Amazon started off with selling books online, and eventually started offering multi-product
portfolio. With internet access and credibility of online shopping portals, the ecommerce business
started booming and many companies started offering products and services to online customers.

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This mode of business has become widely popular both among buyers and sellers, thereby creating
a hotly contested space for ecommerce companies. (Electronic Commerce and the Value
Proposition by Richard Murphy & Vince Narkiewicz)

3.1.1. Analysis of ecommerce models used by various companies

3.1.1.1. Online aggregator model
These companies allow buyers and sellers to connect in their ecommerce platform. Various
sellers list their items in the website allowing buyers to place orders on their selected items.
Sellers are responsible for warehousing, delivery, servicing of the item listed to the buyer.

Ebay is a good example of company using this model. Ebay sellers fulfil orders to customer
directly and Ebay ensures the due diligence.

Ecommerce Company acting as a distributor

In this model, the ecommerce company will act as a distributor. They will buy and stock their
inventory, and will fulfil the orders received from the customers. In this model, the ecommerce
company bears the inventory risk. They would need to buy and stock inventory or fulfil orders
“Just in time”. This strategy will require higher upfront investment and will also increase the
risk of stock outs. (Ecommerce-digest, Business Models, Visited 17.06.15)

3.1.1.2. Mixed model

This model is a mix of online aggregator model and Distributor model. Here, the ecommerce
company will stock and sell their own items through its website, while also allowing other sellers
to list their items and sell through the website. They may also give sellers the option to either
stock their items themselves or stock them at the ecommerce company’s warehouse.

Amazon is the best example of company using such a model. They gain revenue through
sales of their own items, through seller account fees and through fulfilling (warehousing, packing,
delivery) seller’s orders. (Ecommerce-digest, Business Models, Visited 17.06.15)

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 3.2. Macro-environmental analysis of Amazon
Macro-environmental analysis is the analysis of the macro environmental factors including political
and economic and other factors which impacts the organization.

3.2.1. PESTEL analysis:

This is a framework which is used to scan the macro-environmental factors affecting the organization.
It stands for Political, Economic, Social, Technological, Environmental and Legal.

3.2.2. PESTEL analysis for Amazon

PESTEL Key points Relevance to Amazon
Factors
Political Government policies in both emerging and Amazon will be benefitted by
developed economies promote internet growing internet penetration
penetration through huge ICT as higher penetration will
infrastructure investment lead to more online shoppers
Political environment in emerging markets Amazon has plans to invest
like India can become protectionist(with 2bn in India, and any such
respect to ecommerce) if a left wing protectionism will impact that
government comes to power investment
Marketplace fairness act in USA, if The price of products sold on
enacted, would lead to higher prices. Amazon will go up, and
This act will allow state government to thereby the demand might
collect sales tax and use tax from remote reduce. This could lead to
retailers having no physical presence in the lesser revenue for Amazon
state
Taxation policy globally makes a company Amazon not paying taxes in
liable to pay tax only on the net profits of UK and EU is leading to
the company. Although the net profits negative publicity as the
was near to zero, EU and UK authorities government is involved in
have been demanding Amazon to pay taxes naming and shaming
on EU/UK profits

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 Economic Low interest rate in developed markets are This is a good opportunity for
leading to greater consumer spending. Amazon to encash on the
US and UK consumer confidence has been higher consumer spending
on an uptrend
The instability in Greece could cause Higher interest rates could
interest rate to rise in peripheral markets lead to lower growth and
like Italy and also cause some interest rate thereby lower consumer
instability in other emerging market demand impacting Amazon
negatively
Internet retailing has been growing at a Amazon has to potential to
very rapid pace and is expected to retain its capture this tremendous
high growth rate growth to create higher
revenues and profits
Social Change in shopper’s behavior is leading to Amazon is cashing on this
explosive growth in online retailing. opportunity by giving good
More and more people are preferring to deals to shoppers
shop online
Growth of internet penetration in This represents a huge
developing markets is very fast. It is opportunity for Amazon as
expected that more than30-50% of getting the new shoppers
emerging economies’ population will onboard will represent growth
access internet within two years
Technological Mobile technology is able to most of the This will help Amazon target
online transaction through mobile devices. the mobile users. Amazon
Smartphone penetration is very high in needs to build targeted
developed markets and is growing very advertisement campaigns on
fast in emerging markets mobile devices to gain market
share among mobile users

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 Broadband penetration is very high in This will lead to higher
developed markets and internet speed are customer base for Amazon
on the rise on emerging markets
Environmental People are becoming aware about the cost Amazon has try to market
of global warming and taking steps to benefits of online shopping in
reduce their carbon footprint reducing carbon footprint,
e.g., less car travel, efficient
delivery using less fuel, etc.
Businesses need to become more green to Amazon needs to take
attract customers wo like green products initiative to go green – in its
warehouse, IT development
centers, etc.
Legal A common framework or law governing Amazon needs to be aware of
ecommerce globally is absent both domestic and
international laws
Some governments make changes to law Amazon needs to be aware of
retrospectively which could lead to huge the countries who show such
tax increase on past earning and could lead instable regime and be careful
to considerable legal cost when operating in such
regimes

(Slideshare, Amazon.com, Marketing Strategies, visited 17/06/2015)

3.3. Micro environmental analysis of Amazon

Macro-environmental analysis is the analysis of factors close to a business that have a direct impact on its
business operations and success. Corporate strategy of the business should be decided after carrying out
a full analysis of their micro environment.

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 3.3.1. SWOT Analysis:
SWOT analysis is a tool that identifies the strengths, weaknesses, opportunities and threats of an
organization. SWOT is a straightforward model that assesses what an organization can and
cannot do while also assessing its potential opportunities and threats.(Broadening the Concept of
Marketing by Kotler & Levy)

3.3.2. SWOT Analysis of Amazon

Strength:

Amazon possesses a great Customer relationship management(CRM) system and has a great
IT system.

Amazon has very deep pocket, enabling them to do many promotions and spend on advertising
and R&D.

Amazon has strong business relationship with its suppliers and many electronic companies.
It also possesses a very efficient delivery network serving all over developed countries and in
metro cities of emerging markets where Amazon operates.

Amazon is able to offer free one-day delivery to all their Prime customers.

Amazon provides warehousing, packing, shipping, returns facility to all its sellers through their
Fulfilment by Amazon(FBA) program. This helps sellers concentrating on business rather
than on logistics.

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Amazon is able to do a lot of acquisitions which are turning out to be good revenue creator.
(SWOT analysis of Amazon – Amazon AWOT analysis, Amazon, visited – 18/06/2015)

Weaknesses:

Amazon’s overall business has very low margins as shown in their income statements

Amazon has been criticized for avoiding to pay tax on their European businesses. Amazonas
a whole may generate very low profits, thereby avoiding tax in various geographies.

Amazon has been criticized in media for less than optimal working conditions in its
warehouses (SWOT analysis of Amazon – Amazon AWOT analysis, Amazon, visited –
18/06/2015)

Opportunity:

Amazon can do backward integration to buy some manufacturers /suppliers to create

synergies

Expansion of product offering and self-branded products are significant opportunity for
Amazon

Amazon can tie up with major players of some untapped markets to create an ecommerce
ecosystem and earn high margins

Global expansion, especially in emerging markets, is a significant opportunity for Amazon.

(SWOT analysis of Amazon – Amazon AWOT analysis, Amazon, visited – 18/06/2015)

Threats:

Introduction of “Marketplace Fairness Act” in the USA may lead to increase in sales tax
liability- thereby increasing prices of products sold through Amazon and may decrease
revenues.

Any similar government regulations in any other country remains a threat

Online security is very important and security breach is a significant threat.

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 Growing competition in developed markets and established competition in some developing
markets e.g., Flipkart in India.

(SWOT analysis of Amazon – Amazon AWOT analysis, Amazon, visited – 18/06/2015)

3.4. Strategic implications of business environment on Amazon

Amazon is very well positioned to capture the value in the ecommerce business environment.
They are one of the old timers in this business and have come a long way from selling books to
selling virtually everything.

3.4.1. Brand name and customer mindshare

Amazon has a great brand name associated with more than 20 years in business. Also, they
have a good mindshare among the customers who are used to online shopping.

3.4.2. Attracting more sellers by Amazon Seller Central and Amazon FBA
Amazon is hugely successful in attracting sellers to register with them mainly due to Amazon
FBA. Amazon FBA is a program through which sellers registered with Amazon lets Amazon
handle the entire product fulfilment (Storing in warehouse, packing, shipping, return shipment).
Sellers who don’t want to handle their own inventory and order fulfilment choose Amazon.

3.4.3. Global business with huge expansion potential

Amazon is now a global business with immense presence in all major developed economies
and scaling up their presence in the major emerging market economies. This, in medium term,
will clearly impact their growth as the emerging market economies are likely to offer greater
growth potential compared to the developed markets. The emerging economies like India is
geared for huge internet penetration which will bring a huge population into the ambit of
ecommerce. (Business Strategy By David Campbell & George Stonehouse & Bill Houston)

4. Competitive Strategies Analysis & Evaluation

Competitive strategies are the methods to achieve a competitive advantage in the market.
Competitive strategies can be evaluated using three different frameworks- Porter’s generic
strategy, Porter’s five forces and Product life cycle. (Marketing Strategy by Paul Fifield, 3rd
edition)

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 4.1. Porter’s generic approach
This approach indicates three types of competitive strategies that can be implemented. They
are cost leadership, differentiation and a focus strategy. Cost leadership aims at selling cheaper
by lowering the production costs, differentiation aims at selling better products and differentiating
them from the market. Both differentiation and cost can have a focused market segment or broad
market segment as shown in figure below. (Marketing Strategy by Paul Fifield)

(Michel E. Porter. Competitive Strategy)

4.1.1. Porter’s generic approach for Amazon versus eBay

Both Amazon and eBay are well known and are huge brands in the global markets commanding
good customer mindshare. They have good presence in online search engines and SEO space.

Amazon generic strategy:

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 Amazon is a cost leader by providing customers with products at lower than retail store
prices. This is possible as the cost of retail stores are absent. Amazon also differentiates its
offering from other eCommerce players by providing a better website, better returns policy and an
efficient delivery mechanism.(Strategies to Achieve Market Leadership: The Example of
Amazon by Michael Mirow)

eBay generic strategy

eBay is focused on proving products at low cost mostly through the auction route. Although it
sells as an online retailer as well, its popularity in online auction market is more. Customers like

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to get items for cheap through auction. This makes eBay strategy more towards cost-focus in
the Porter generic strategy framework.

(Slideshare, Strategic evaluation of eBay, Visited – 18/07/2015) &

(Strategies to Achieve Market Leadership: The Example of Amazon by Michael Mirow)

4.2. Porter’s five forces

Porter five forces analysis is a framework to analyze the level of competition within an industry
and business strategy development. It draws upon industrial organization economics to derive
five forces that determine the competitive intensity and therefore attractiveness of an industry.
(Marketing Strategy by Paul Fifield, 3rd edition)

(Marketing Strategy by Paul Fifield)

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 4.2.1. Porter five forces for eCommerce and implication on Amazon and
eBay
4.2.1.1. Threat from new entrants/Barriers to entry

The forces shown above clearly indicates that the industry is having high barriers to entry.
Amazon and eBay both stands to benefit from this.

4.2.1.2. Competition/Rivalry

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 Most of the factors impacting competition is on the higher side – thereby indicating that
the industry rivalry is high. This adversely impacts both Amazon and eBay as high
competitions can depress margins. (Five Competitive Forces of e Commerce Industry –
Pallav)

4.2.1.3. Bargaining power of suppliers and buyers

Supplier has some bargaining power due to industry competition and product
differentiation. Threat of vertical integration depress supplier power. Buyer has some power
due to availability of substitutes. Amazon has good buyer power over buyer due to importance
of items sold and switching costs. This indicates that supplier and buyer power indicates average
competition for both eBay and Amazon and is not a major threat.

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 4.2.1.4. Threat of substitutes

There are a lot of substitutes available as shown in the figure above. These substitutes pose
a significant competitive threat in industry- and applies to both Amazon and eBay.

(Online bookseller’s turning point - Cottrill, Ken.) &

(Forbes, eBay Through the Lens Of Porter's Five Forces, Visited, 19/06/2015) &

(Five Competitive Forces of e Commerce Industry – Pallav)

4.3. Marketing mix as competitive edge

The marketing mix is a business tool used in marketing and by marketers. The marketing
mix is often crucial when determining a product or brand's offer, and is often associated with the
four P's: price, product, promotion, and place.

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 (The Marketing Mix Strategy in Influence to the Competitive Advantage, Endang
Chumaidiyah, Jan 7-9,2014)

4.3.1. Marketing mix of Amazon versus eBay

4.3.1.1. Product
Amazon’s marketing mix for products is very diverse with products like phones, tablets,
kindle, books, consoles and games, clothing, jewelry, household equipment, kitchen equipment,
etc. Amazon continues to expand its product base.

eBay also has a diverse array of products being sold with major focus on electronics. eBay
also focusses on online auction market.

4.3.1.2. Price
Amazon and eBay both aims at competitive pricing of its products and run promotional
discounts at various times to attract and retain customers. The pricing strategies are broadly
similar. eBay, however, runs an auction business which is not present in Amazon. Amazon
attracts customers to pay for Prime accounts, which entitle them to free one-day delivery.

4.3.1.3. Promotions
Amazon uses web-based (search engine, social media, etc.) advertising as well as
advertising in television. They also sponsor various events for promotions.

eBay doesn’t use traditional modes of promotions like advertisements much, and rely mostly
on web-based advertisements and promotional sales.

4.3.1.4. Place
Any computer with an internet connection has access to Amazon and eBay. So bothe these
companies are pretty much present in every location where it is able to deliver. The distribution
network of both companies is strong. Amazon offers one-day delivery while eBay is not
interested in that. (eBay vs. Amazon.com- Robert D. Hof in San Mateo, Calif., and Linda
Himelstein in San Jose, Calif.)

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 4.4. Discussion - Amazon versus eBay
Amazon and eBay are both global leaders in ecommerce space, however, their operational
strategies are different from each other.

4.4.1. Customer and seller value proposition(USP) of Amazon versus eBay

Amazon offers a prime account to its customers allowing them to get the product delivered to
their doorsteps in 1 day. This also ties up the customer with a onetime fixed fee which in turn,
will prompt the customer to visit the Amazon site more often and buy products from Amazon.

Sellers in Amazon will be able to pull benefits out of Amazon prime if they register with Amazon
FBA, i.e., storing, handling, delivery and return of their products through Amazon(warehouse).
The Amazon prime is thereby, a dual selling proposition for both the customers and sellers
attracting them to the Amazon platform.

eBay is able to attract customers through their bidding platform strategy which allows
customers to get products (both new and used) at a lower price using the fair price discovery
mechanism. Also, eBay is not directly competing with the sellers on the platform, thereby trying
to achieve a fairer competition among sellers.

(International Journal of Marketing Studies by Almoatazbillah Hassan)

4.5. Discussion- similarities and differences

The similarities between these strategies is in the fact that both these are a platform for sellers
to sell their product using the platform.

However, the difference lies in the fact that eBay offers the sellers to allow customers to bid on
their product while Amazon doesn’t. Amazon, however, allows sellers to handle their product
directly through the Amazon warehouse – thereby allowing them to directly ship the product from
manufacturer to the Amazon warehouse and then letting Amazon to take care of handling, packing,
delivery and customer returns. This facility is not available with eBay.

eBay has never ventured into online publishing industry while Amazon has revolutionized this
industry. Amazon also has a booming product business through its branded Kindle. They are
also launching into the tablet/smartphone sector. eBay doesn’t offer any self-branded products

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However, there are some category restrictions on Amazon which induces people selling antique
items to use eBay.

Thus, there are points of parity and points of differences between the two companies. While
the ecommerce segment would need to have point of parity between competitors, the points of
differences are important in differentiating a brand with other brands. Amazon has been quite
successful in building points of differences with its competitors which gives them a competitive
edge in the ecommerce marketplace. The diversification strategy of Amazon by entering new
products, markets, etc. is better than that of eBay. (Marketing Donut, Visited 19.06.15)

4.5.1. Effectiveness- which is better

This is a difficult question to answer, however, let’s look at potential effectiveness criterion
objectively

Trustworthiness: eBay sale sometime feels less upscale, with its descriptions not being
consistent and its return policy not very well crafted. Amazon has a more premium feel, with its
listing more consistent and one listing per product.

Simplicity: One listing per product makes life easier for Amazon customers while eBay will
pop up every single listing of the product on the search page, which will make users scramble
between which one to buy.

SEO/design: Both the websites are pretty active in search engine optimization(SEO) and
are able to drive traffic into their website through search engines.

Sales and promotions: it’s easy to include a sale /promotion in Amazon website to eBay
website. eBay sellers may have to use external coupon code to announce sales, while Amazon
sellers can do it directly on their Amazon page

Fulfilment by Amazon(FBA): Amazon offers sellers the choice of letting their orders
being fulfilled (stored, packed, shipped, return handling) by Amazon while Ebay doesn’t offer
this choice to sellers. Also Amazon Prime customers can order anything from Amazon which is
Fulfilled by Amazon and get very quick delivery.

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 On a whole, it appears that Amazon is gaining revenues and market share faster compared to
eBay due to multitude of factors described above. (Which is better bet:Amazon or Ebay. - Dan
Moskowitz)

5. Product/Market Growth & Marketing Strategies

Product/Market growth strategy is best studied with the help of ANSOFF matrix.

5.1. ANSOFF matrix

The Ansoff Growth matrix is a marketing planning tool that helps a business determine its
product and market growth strategy.

5.1.1. ANSOFF matrix for Amazon

Existing products New products
Existing markets Amazon needs to increase Amazon’s launch of new products
warehousing capabilities in USA like Fire TV, tablets, Kindle has
and other developed markets to been a success. Amazon launch of
improve distribution Echo will probably be a success.
Amazon needs to keep investing in Amazon needs to keep investing in
promotions and web marketing creating future proof products to
campaigns to raise awareness keep hold of the market

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 Amazon needs to donate to social
causes to create positive publicity
New markets Amazon’s strategy to expand in Amazon should promote its
emerging markets like India, Italy, innovative products like Echo, Fire
Poland is a good strategy TV, etc. in the emerging markets
Amazon must create great where its expanding
warehousing capabilities in these Amazon should create R&D centres
countries in some emerging markets where it
Amazon should promote FBA can be very cost effective. Also
program in these countries as well access to quality talent will prove
Amazon should hire the best people advantageous
in business to ensure success in
these new areas

(Prezi, Amazon Ansoff Matrix, Visited 18.06.15)

5.2. Suggestions to improve competitiveness and sustainability

Increasing competitiveness and sustainability will involve engaging deeply with suppliers,
customers and government while understand how the issues of sales tax and income tax might
force the business to adapt to changing regulatory environments.

North American business currently is a fast growing business due to increasing customer
penetration and better product portfolio. Other parts of the world have a great growth potential.
Amazon is investing heavily in emerging markets like India, Italy, Spain and China. It’s
strategically very important for these investments to bear fruit in the medium term. Amazon’s
product like Amazon Fire TV and phones are doing well, and product portfolio is getting
diversified with innovative offerings like Amazon Echo. Amazon’s free delivery to customers
require huge investment in Amazon warehouses in different parts of the world.

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 5.2.1. Recommendation for increasing sustainability
Increasing the bottom-line: In the recent past, the bottom-line of Amazon has been
going down which needs to be pushed up. It is important to formulate an operating strategy to
lower the operating costs like shipping cost and decrease the account receivables to improve cash
flows. The points mentioned under “competitiveness” should be undertaken to lower the costs.

Investment in online marketing: Many customers use search engines to find the relevant
products. Amazon must invest in advertising to make sure that the relevant products are
highlighted in search engines, youtube advertisements, etc.

Customer Analytics: Targeted advertisements are the flavor of the day in online marketing
space. Amazon needs to keep the right amount of investment into customer analytics and digital
campaigns to gain customer mindshare

Marketing products: Create and aggressively market successful products like Amazon Fire
phone, Amazon Fire TV, Amazon Echo, etc. It’s important to increase the sales of these products
in various markets to achieve the economies of scale. (Coopetition-based business models:
The case of Amazon.com by Paavo Ritala & Arash Golnam & Alain Wegmann)

5.2.2. Recommendation for increasing competitiveness

FBA: Add more warehouses and FBA to attract more sellers to sell through Amazon. Also,
more warehouses will help Amazon to deliver items to customer faster. One-day delivery to
more number of location can help Amazon to gain more Amazon Prime accounts, which in turn
will generate higher sales. However, more warehouses in state with sales tax nexus rules (in
USA) will increase the sales tax burden of Amazon. This will increase the prices of the product,
but this is a tradeoff which needs to be made for the business growth

Economies of scale: It is important to increase the sales of Amazon produced products so

that economies of scale in manufacturing can be built in. Kindle devices have achieved the
economies of scale, similarly it’s important to take other media devices like Amazon Echo,
Amazon fire to the path of achieving scale economies. Parts of manufacturing should be
outsourced to low cost centers with ability to produce consistent high quality produce.

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Shipping cost: Amazon should keep incurring the costs of free delivery. However, they
should consider acquiring freight forwarding companies, especially in markets where they are
growing fast, to ensure that the delivery/shipping costs could be optimized. Amazon should
consider acquiring freight forwarding companies in India and Italy where these companies are
available at reasonable valuations and Amazon has big investment plans.

Product pricing: While Amazon is the retailer of a product, Amazon must acquire good
quality products at lowest possible price directly from the manufacturer. This will ensure that the
products can be sold at competitive prices maintaining good margins. Product and inventory
planning must be undertaken strategically. (Coopetition-based business models: The case of
Amazon.com by Paavo Ritala & Arash Golnam & Alain Wegmann)

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6. References:

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http://docs.aws.amazon.com/AmazonS3/latest/dev/Introduction.html. Last accessed 17th
jun 2015
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4. Shikar Ghosh . (2015). Business Models. Available: http://www.ecommerce-
digest.com/business-models.html. Last accessed 17th jun 2015
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http://www.slideshare.net/MaxJallifier/final-presentation-16443977. Last accessed 17th
jun 2015
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FORCES OF INDUSTRY. 1 (1), 2-20.
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porters-five-forces/. Last accessed 19th Jul 2015.
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