TECHNOLOGICAL INSTITUTE OF THE PHILIPPINES - MANILA
COLLEGE OF INFORMATION TECHNOLOGY
Case Study: Amazon.com, Inc.
Submitted by, Dyana M. Forescal
Background:
For the last two decades, Amazon.com has been serving customers
worldwide. Amazon.com was founded by Jeff Bezos back in 1995. The founder’s
vision was to build a virtual shopping place for book lovers. Amazon.com brings the
world’s largest book store to the doorstep of the people around the world. All people
have to do is to search for and select the desired book. It took 30 days to deliver
books to the customers of 50 states and 45 countries. Amazon.com was a huge
success in nineties.Amazon.com became a platform for the retailer and individuals in
2000.Amazon.com offers their services towards four types of customers, consumers,
sellers, enterprises and content creators. (Annual report 2013) Amazon serves the
customer through the popular web site www.amazon.com. Now a day customers can
access through mobile technology.Amazon.com apps are also available for the
customers.
I. Part 1: Information Systems utilized for internet activity
1. Information System:
In 1995 Amazon used the website system and order fulfillment system
separately in order to improve security. By 1995 amazon has a huge database
running on Digital Alpha Servers. Amazon renovated the entire system in the year of
2000. The company spent $200 million on the new system. These systems include
1|Page
TECHNOLOGICAL INSTITUTE OF THE PHILIPPINES - MANILA
COLLEGE OF INFORMATION TECHNOLOGY
analysis software from “Epiphany”, logistics from “Manugistics” and new DBMS from
oracle. (Gerald, 2012) For communication with supplies amazon seal deal with
Excelon for business-to-business integration system. (Konicki, 2000). Amazon Web
Service (AWS) and Simple Storage Service (SS) are the main systems developed by
amazon. Through this system, amazon can maintain its vast number of products and
millions of active customers. Amazon web service has become a global platform for
an individual to retailers to sell their products. Through reliable, Scalable, and robust
web service amazon creates global domination. The challenges of amazon.com web
services are very prominent. Every second thousand customers are searching. For
products and ordering products, the systems have to be fast, reliable and secured.
Every second CRM (Customer Relation Management) system is taking customer
information through their searching, data mining, and wish list and so on. Whatever
customer buys or not they are providing information about them. Systems are smart
enough to analysis the information and provide service accordingly. For tracking
fraudsters, amazon.com built a system known as SAS (Smart Analysis Search). This
system decrease and detect fraud on the web site by analyzing behavioral pattern.
SAS allows amazon.com to measure and personalize customer and help to serve
customer effectively. (Kantardzic, 2003) Amazon.com is an information system based
on Service Oriented Architecture (SOA). SOA is a fully distributed and decentralized
service platform that enables amazon‟s information system to be robust and scalable.
SOA concentrates on multiple applications rather than a bigger process.
2. Transaction Processing System:
Every customer has his profile on amazon.com or must have a profile in order
to order any product. Amazon offers many features to personalize their profile with
web tools like shopping cart, wish list.
2|Page
TECHNOLOGICAL INSTITUTE OF THE PHILIPPINES - MANILA
COLLEGE OF INFORMATION TECHNOLOGY
2.1. 1-click purchase:
Amazon brings 1 click ordering, personalized shopping services and easy to
use card transaction, e-mail communication with customers and direct shipping
around the world. (1999 Annual report) Customers with previously activated
functionality can order items clicking only one button without fulfilling order form.
Amazon’s secured server automatically provides the information required for the
registered customer. (Annual report 1998).
2.2. Secure Credit/debit card payment:
For the secure transaction, amazon.com uses secured server
software. Customer‟s personal information, credit card number and everything is
encrypted in order to secure information over the internet.
3. Recommendation System:
Amazon developed an intelligent recommendation system which recommends items
by customer‟s past purchases and searching data. This system store every order
made by the customer. For example, if a customer buys a fiction book then the
recommender system will recommend related books to the customer. The system is
basically based on “linking” and “Data mining”. Every movement or search query is
noticed and tracked down to provide the best possible recommendation. This
enhances the browsing experiences of the customers because this acts as an
interactive platform between website and customers which helps maximum customer
satisfaction.
3|Page
TECHNOLOGICAL INSTITUTE OF THE PHILIPPINES - MANILA
COLLEGE OF INFORMATION TECHNOLOGY
3.1. Interactive searching System:
Amazon provides an interactive searching option for its customers. Customers can
select desired items catalogs to find the item. Millions of items can be gained by
searching for tools. (Annual Report 1998).
4. Supply Chain Management (SCM):
For the huge success by 2004, the “Supply Chain System” played a huge role.
In 2000 amazon spent a good amount in order to build an automated warehouse and
automated supply chain management. (Jenkinson 2005, business week 2003) All the
supply chain activities are controlled by the CRM system. (Gabe 2010).
4.1. Enterprise Resource Management (ERP System):
Amazon uses oracle as an ERP. It has a huge database that holds information
related to the customer. The customer ‟s ordering process is automated as the order
is taken as it automatically find the nearest distributing center for the delivery.
(Bacheldor, 2004) This system fastens the order fulfillment process with the order
tracking and reduces any distribution mistakes. By this system, the company reduced
50% of its customer service contacts since 1999 because of fewer mistakes.
(BusinessWeek, 2003).
4.2. Customer Relation Management (CRM):
In order to gain customer satisfaction and loyalty, amazon uses the Customer
Relationship Management system (CRM). The CRM system follows the following
4|Page
TECHNOLOGICAL INSTITUTE OF THE PHILIPPINES - MANILA
COLLEGE OF INFORMATION TECHNOLOGY
application to collect information about the customer. All personal information of
customers their credit card record, transaction record, order record, profile, their past
purchase history are collected in the database. The order processing system takes
care of the transaction record with the secured transaction method and it delivers
instruction to the delivery system for the execution of shipment. Through customer
feedback, customer interest, wish list, product reviews web page system collect
customer information. Automated communication is ensured with customers through
e-mail and message systems and order information systems. (Jenkinson, 2005;
Hottovy, 2011) With the CRM system amazon successfully integrates customer sales,
services, and communication. (Jenkinson 2005; Manjoon 2011).
II. Part 2: Business strategies applied for internet activity
In the early stage of amazon.com journey, the business strategy of
amazon.com was very simple and forward. Their one and only strategy were to sell
books to the customer online. They invested in the customer and offer them a huge
collection of books online. “From the beginning, our focus has been on offering our
customers compelling value. We realized that the web was and still is the World Wide
Web. Therefore we set out to offer the customer something they simply could not get
any other way and began serving them with the book.” -Jeff P. Bezos (shareholder’s
letter 97) Amazon.com attracted customers by offering 1-click shopping, low price
and increasing customer’s value. Creating easy to use and easy to learn customer
interfaces was a key aspect of Amazon’s strategy. (Jarvanpaa, S.L., Tiller, E.H.).
5|Page
TECHNOLOGICAL INSTITUTE OF THE PHILIPPINES - MANILA
COLLEGE OF INFORMATION TECHNOLOGY
1. Smart Innovation Strategy:
The main reason for the successful journey of amazon.com so far is the innovation
strategy of the company. Amazon.com started the business by offering DVDs and
CDs alongside books. In the following year, they brought auction theme to the
customer. Their strategy was to provide customers a better experience of the
auction by protection from the fraud to the bidder though this strategy did not
bring success to the company. Amazon followed the B2C (Business to Customer)
model. But it again changed its strategy and transformed from a direct sales
business model to a sales and service model. Through this model amazon’s target
group were customers and another business group. Amazon.com offered a small
business group to use amazon web service and platform to offer their product to
the customers. Amazon took a commission on each sale of other retailer’s
products. Through this service, amazon created an ecosystem in the market.
Through the „Amazon Associates Program‟ amazon created and developed a
partnership with customers and businessmen. The primary goal of the program
was to acquire new customers to boost sales on Amazon.com. Amazon instead
gave them its affiliates a revenue share. (ISCKIA and LESCOP) This allowed
Amazon to extend its market place into a broad section from a single product.
There was a change in the model in the Amazon business strategy. It was a cyber-
book store and with the affiliates and association of the other retailer and being a
platform to the others it became a cyber-market.
2. Customer Relation Management Strategy:
When a customer first enters into Amazon.com he/she is provided „ Featured
Product‟ by the website, But when the customer visits for the second time the
recommender system automatically provides products by studying customer
interests and personality. Customer acquisition and retention have been the most
6|Page
TECHNOLOGICAL INSTITUTE OF THE PHILIPPINES - MANILA
COLLEGE OF INFORMATION TECHNOLOGY
priority to Amazon.com‟s strategy. Through the web site, Amazon maintains
sophisticated communication that automates the process of creating value for the
customer. (Jenkinson and sain).
Jeff Bezos 3 big idea –
1. Limitless inventory
2. Customer Care
3. High margin, lowest price. (FABERNOVEL)
3. Limitless Inventory:
When amazon started offered books to the customers. But over the
period it increased its products from books to music, movie, cloud storage,
gaming and many more.
Porter mentioned three district sources-
a) Serving few needs of many customers
b) 2. Serving the broad needs of a few customers
c) Serving the broad needs of many customers.
(Porter, 1996) Initially, Amazon has followed the first source of serving with
few products. But it changed its strategy over time and now it fits into third
sources.
4. Customer Care:
7|Page
TECHNOLOGICAL INSTITUTE OF THE PHILIPPINES - MANILA
COLLEGE OF INFORMATION TECHNOLOGY
“If you do build a great experience, the customer tells each other about that. Word to
mouth is very powerful” - Jeffry p. Bezos One of the success factors of amazon.com
is word of mouth. Because of excellent customer service customers trusted Amazon.
They used to talk about Amazon.com to others. This spread rapidly by creating
increasing traffic on the web site.
5. High Margin, Lowest Price:
Amazon.com provides products significantly cheaper than its competitors.
One of the main visions of Amazon.com is based on the long term plan. (1997
Stockholder report) This makes easier for amazon to take risk of low profit in order to
succeed in the future. An estimate shows how it is possible for amazon to become
profitable at the lowest price. A product on average gets sold in 33 days through
amazon.com. On the other side, competitors like best buy took 70 days to sell the
product. (FAVERNOVEL) Amazon keeps the best-selling product to its own stock and
longer tail items to third party sellers stock. This gives an advantage to the company.
6. Marketing and Promotion Strategy:
Amazon’s marketing strategy remains a strategy brand name, increasing
customer traffic, customer loyalty. To gain so amazon.com undergone various
promotional methods. Public relation activities, online and traditional advertising
including radio, television and print media are prominent.
7. Associate Program:
8|Page
TECHNOLOGICAL INSTITUTE OF THE PHILIPPINES - MANILA
COLLEGE OF INFORMATION TECHNOLOGY
To boost the customer traffic and rate of sale amazon.com started an
associate program with customers and small businessmen. Approximately 200,000
websites have enrolled in the associate program. (Annual report 1998).
III. Part 3: e-CRM cycle Conducted for internet Activity: Customer Relationship
Management.
In today‟s business world CRM is no longer considered as a trend rather than
a standard requirement. For competitive advantage and increased revenue, in most
of the case with effective CRM, every company have resulted in increased revenue
and profit as well as greater customer loyalty. “Customer Relationship Management is
to identify a company‟s the best customer and maximizing the value from them by
satisfying and retaining them.” Kennedy (2006).
1. Electronic Customer Relationship Management:
The application of CRM to internet-based e-commerce business is the
basic concept of electronic CRM (E-CRM). Pan (2003) said “e-CRM provides
the ability to capture, integrate and distribute data gained at the organization‟s
website throughout the enterprise.” In today‟s world e-commerce platform
does not bind itself in single-channel rather expanded toward multichannel
using internet, web browser, e-mail, PDA, smartphones, etc. e-CRM solution
supports marketing, sales, and service of the rapidly growing online-based
business. A recent study revealed that a 10% gain in repeat customers arises
10% to the revenue of the company. (Scullin, Allora, Lloyd, Fjermestad)
Amazon.com successfully integrated the CRM system. Amazon innovated a
number of approaches to gain and satisfy the customer through the
implementation of electronic customer relationship management. No one in
the world better understands their customer better than amazon. This yields
9|Page
TECHNOLOGICAL INSTITUTE OF THE PHILIPPINES - MANILA
COLLEGE OF INFORMATION TECHNOLOGY
maximum revenue to amazon.com over the competitive world and kept always
1-step ahead of its competitor like e-bay, best-buy.
2. How amazon implements CRM:
Amazon has an extensive implementation of customer relationship
management. Each and every customer are taken into account on amazon.com.
2.1 Customer Selection:
The customer selection part through Amazon.com website has given amazon
an extra benefit in order to boost its business. Amazon uses numerous methods to
select customers by knowing their customer behavior. Amazon’s early target was
people who love books. But days its target market is vast and challenging. 10
Amazon through their website, PR strategy target people to motivate them to use
amazon.com.
2.2 Customer Acquisition:
2.2.1 Customer account:
Every customer buying through amazon.com has his/her profile on the
Amazon website. Amazon.com creates a database to store the account,
information of the customer, credit/debit account. Through the customer
10 | P a g e
TECHNOLOGICAL INSTITUTE OF THE PHILIPPINES - MANILA
COLLEGE OF INFORMATION TECHNOLOGY
account amazon knows about the customer, their personality and last of all
can satisfy them.
2.2.2 Wish List, review system:
Amazon always encourages the customer to add favorite items to the
wish list. This helps amazon to know better about the customer. Product
review by customer not only be help customers to find and select the product
but also acts as a direct marketing event for amazon.com.(Jenkinson and sain)
Amazon allows making a connection between the customer, communicating
and viewing their interest help to amazon to gain customer trust and initiate
word of mouth. In the first 3 months of 2000, amazon acquired 3 million new
customers without any investment. To satisfy customer amazon uses
information acquired through customer account, wish list, etc. Amazon
brought a number of systems to satisfy the customer. 1-click ordering has
been an excellent system innovated by amazon which revenue less than 20 sec
to enable purchase. (Jenkinson and sain).
2.3 Customer Retention:
Amazon.com emphasizes customer retention over just acquisition. The
analysis shows 40% of amazon‟s customers are frequent users [Jenkison and sain].
This indicates the customer always come back to purchase product in amazon.com.
Amazon does retain customers very smartly and sincerely by satisfying its best buyer
through good service and effective communication. Amazon founder Jeffry P. Bezos
said “The optimal to do is to spend 70% of your time, energy, focus and dollars
building great customer analysis and 30% shouting about it. Integrating lean
11 | P a g e
TECHNOLOGICAL INSTITUTE OF THE PHILIPPINES - MANILA
COLLEGE OF INFORMATION TECHNOLOGY
advertising, service and selling amazon acquires the customer and through great
customer experience, it retains the customer.
2.4 Customer Extension:
The market place is very competitive even for amazon.com with a competitor
like e-Bay, BestBuy breathing very behind amazon. Customers now days get every
single distraction through other competitor’s service and brand value. It is very
challenging to every retains customers When people ask me if our customer is loyal I
say, “Absolutely right up to the second somebody else offer them a better service
“Jeff Bezos The comment explains how challenging the market is. But even though
Amazon‟s better customer service, trust factor, brand value initiate them rapid and
growing customer
Popularity. About 70% of amazon’s customers trust amazon and recommend
amazon to their friend [Jenkison and sain] Amazon integrated communication in
between customers. This helped amazon to retain even extends its customers.
Customer’s reviews of products trusted by other customers and motivate them to buy.
IV. Part 4-Recommendation for Amazon.com:
Amazon.com is the ultimate online retailer around the world. Its nearest but
not even close competitors are e-bay and best buy. But the competition is growing
day by day.
1. Competing in the market:
12 | P a g e
TECHNOLOGICAL INSTITUTE OF THE PHILIPPINES - MANILA
COLLEGE OF INFORMATION TECHNOLOGY
Like the past, amazon in the future will have to come up with special
something. The global market is changing day by day. Business competitors
are investing large to take amazon down. There is no room for relaxation. It is
very challenging and has to be consistent in the market to be the number one
retailer shop.
2. The innovation of new Product:
It is essential for amazon to think out of the box and bring new
products to satisfy and retain customers to be loyal to amazon.com. Amazon
always offered its customers better quality and better service. But in the
future, it may not be the same. People in today‟s world ask for more. Amazon
has to be smart enough to understand the customer need before even
customers know about it.
3. Integration of New Technology:
Technology is making progress like the spread of light. A company like
„amazon‟ needs to be adaptive and technology-friendly to retain its
domination in the market. Amazon’s new technology of Drone delivery system
indicates it is planning and investing a significant amount of money in
technology for the near future.
4. Customer Loyalty:
For an upward revenue stream, customer loyalty is essential.
Amazon’s most of the buyers are its repeat customers who are loyal to
Amazon. But growing competition can be a risk to amazon’s loyal customer.
5. Global Expansion:
Amazon is expanding its business around the world. But this may
cause significant strain in a number of sectors like management, inventory,
13 | P a g e
TECHNOLOGICAL INSTITUTE OF THE PHILIPPINES - MANILA
COLLEGE OF INFORMATION TECHNOLOGY
supply system and moreover to amazon’s market place. “We may not be
successful in our efforts to expand into international market segment” (annual
report 2013) International market is very challenging because of political and
economic conditions. Upgrading e-CRM and investing more towards customer
information for better understanding the customer needs and behavior is
essential.
SWOT Analysis of Amazon
The SWOT analysis of Amazon is given below:
Amazon’s Strengths – Internal Strategic Factors
1. Strong brand name – As a global e-commerce giant, Amazon has a strong
position and successful brand image in the market.
2. Customer-oriented – Amazon caters to a large number of customers for
everyday needs at inexpensive prices. This has made it a customer-oriented
brand.
3. Differentiation and Innovation – Amazon frequently brings creative ideas and
innovative additions to its product line and service offerings like Witlings Aura
Smart Sleep System. This creates differentiation from other companies.
4. Cost Leadership – Amazon doesn’t incur costs in maintaining physical retail
stores by selling everything online. With economies of scale, Amazon efficiently
controls its costs and lowers its inventory replenishment time. The company has
formed numerous strategic alliances with many companies like Evi Technologies,
Thalamic Labs, Shofar, The Orange Chef, etc. It has a strong value chain system
which also helps in maintaining a low-cost structure.
5. Largest Merchandise Selection – Amazon owns an extensive product mix
that attracts online customers to make their majority of purchases from it rather
14 | P a g e
TECHNOLOGICAL INSTITUTE OF THE PHILIPPINES - MANILA
COLLEGE OF INFORMATION TECHNOLOGY
than other online retailers. As of 2018. Amazon has sold 562.3 million products in
its Amazon.com Marketplace.
6. A large number of third-party sellers – Due to the high traffic volume on
Amazon’s sites, a large number of third-party sellers have joined the platform of
Amazon to sell their own merchandise. The data from Fulfillment by Amazon
(FBA) reveals that there are more than 2 billion items available from third-party
sellers.
7. Go Global and Act Local strategy – This strategy has benefitted Amazon the
most. Amazon develops partnerships with local supply chain companies that help
it in competing against domestic e-commerce rivals. It understands the local
needs and launches its services as per the country’s culture.
In India, for example, it has launched a market campaign “Aur Dikhao” to
encourage users to search for more of its products.
8. A large number of acquisitions – The successful acquisitions of Whole
Foods, Zappos.com, woot.com, Junglee.com, IMBD.com, and many others have
produced significant revenues and profits for Amazon.
9. Involved in 3 key business – Amazon Marketplace, Amazon Web Services
(AWS), and Amazon Prime are 3 key businesses of Amazon which work and
support each other. As a whole, they generate massive profits and advantages for
the company.
10. Highest revenues in the industry – With over $778.39 billion market
capitalization and above $200 billion annual revenues, Amazon is the market
leader with the highest revenues in the industry.
11. Superior logistics and distribution systems – Amazon uses highly efficient
logistics and distribution systems. It even has fixed rates for different delivery time
periods. Thus, it executes reliable, secure, and fast delivery of goods and
products to the customers.
15 | P a g e
TECHNOLOGICAL INSTITUTE OF THE PHILIPPINES - MANILA
COLLEGE OF INFORMATION TECHNOLOGY
Amazon’s Weaknesses – Internal Strategic Factors
1. Easily imitable business model – Online retail businesses have become
quite common in this digital world. So imitating Amazon’s business model for rival
firms is not so difficult. A few businesses are even giving Amazon a tough time.
These include Barnes & Noble, eBay, Netflix, Hulu, and Oyster, etc.
2. Losing Margins in Few Areas – In few areas such as India, Amazon has
faced losses. It’s free shipping to customers can be one of the reasons that
expose the risks of losing margins in some markets.
3. Product Flops and Failures – Its Fire Phone’s launch in the US was a big
failure while its Kindle fire device didn’t even grow well.
4. Tax Avoidance Controversy – Tax avoidance in Japan, UK, and the US has
sparked negative publicity for Amazon. President Trump has recently criticized
Amazon over taxes on social media networks.
5. Limited brick-and-mortar presence – Amazon owns very limited physical
stores. This sometimes hinders to attract customers to buy things which are not
sellable on online stores
Amazon’s Opportunities – External Strategic Factors
1. Amazon can gain the opportunity to penetrate or expand its operations in
developing markets.
2. By expanding physical stores, Amazon can improve competitiveness against
big-box retailers and engage customers with the brand.
3. Amazon has the opportunity to improve technological measures and
organizational policies to reduce counterfeit sales. One case of counterfeit sales
came into light when Amazon sold a fake, My Critter Catcher. The product was
sold for $1 less than the original product.
16 | P a g e
TECHNOLOGICAL INSTITUTE OF THE PHILIPPINES - MANILA
COLLEGE OF INFORMATION TECHNOLOGY
4. Can do backward Integration by expanding its production of in-house brands
such as Amazon basics to differentiate its offerings and improve profit margins.
5. More acquisitions of e-commerce companies can increase the company’s
market share and reduce the competition level.
Amazon’s Threats – External Strategic Factors
1. Few controversies have caused a dent in Amazon’s brand image. People
critically reacted and boycotted Amazon sites in 2010 when they found that it’s
selling the book “The Pedophile’s Guide to Love & Pleasure: a Child-lover’s Code
of Conduct.”
2. Government regulations can also threaten the business proceedings of
Amazon in some critical countries. Amazon does not ship to Cuba, Iran, North
Korea, Sudan, and Styria.
3. Increasing cybercrime can affect the network security system of the company.
4. Aggressive competition with big retail firms like Walmart and eBay can give
Amazon a tough time in the future.
5. Imitation is easy as many new entrants are coming up in the market usually
with the same business model of Amazon.
Recommendations:
SWOT analysis clarifies the current standing of Amazon. Few necessary
improvements are needed to be done to administer the lacking and reinforce its
market position.
In short, Amazon needs to strengthen its key areas, minimize its weaknesses,
avail opportunities, and counteract threats for future progress.
17 | P a g e
TECHNOLOGICAL INSTITUTE OF THE PHILIPPINES - MANILA
COLLEGE OF INFORMATION TECHNOLOGY
Few recommendations are given below:
1. Consolidate the market dominance by boosting its marketing efforts,
promotional activities, and competitive advantages.
2. Strategically deal with global controversies. Amazon needs to resolve tax
issues and manage its app’s features efficiently to diminish negative publicity in
the market.
3. Increase its limited presence through opening physical stores outside the
U.S. This will augment brand popularity and market reach.
4. Enhance its strategic entry in developing countries where many growth
opportunities are available.
5. Increase competitive edges and enlarge the gap between Amazon and its
biggest competitors.
6. Address the issues of counterfeit sales and cybercrimes by upgrading
technology measures.
7. Enhance network security systems for the protection of consumers’ rights.
18 | P a g e
TECHNOLOGICAL INSTITUTE OF THE PHILIPPINES - MANILA
COLLEGE OF INFORMATION TECHNOLOGY
19 | P a g e
