Competitors and Price
Amazon competes with product focused retailers, online marketplaces, and mass merchandise retailers. Amazon is leading in pricing. Amazon has brought its prices in line with those of its competitors like Walmart, and Target. Amazon strategy was to discount the price of merchandise to undercut these retailers, but the strategy has not been proven to be profitable in the long run. Companies like Barnes and Nobles and Borders continue to operate profitable physical retail stores, despite increasing pressure from Amazon. But they still cannot be able to compete to an advantage, because they lack an ability to compete in the internet retail environment. Instead of competing fiercely with Amazon, some competitors are partnering with Amazon to increase their web presence. One partner is Borders, they let Amazon handle the website and its fulfillment infrastructure. Amazon is expanding its business, not just focusing on e-commerce. One of Amazon highly profitable subsidiary is Amazon Web Services. This section of the company just handles five percent of the company’s total sales, but it is worth around fifty billion dollars. The reason why its value is high, is because of its cloud infrastructure and application platforms. This system lets Amazon see the product prices of its competitors, while Amazon licenses their product to said competitor. This is possible because it saves other companies money by outsourcing their web infrastructure and letting Amazon handle its services. It’s also a comparative advantage to Amazon, because it’s the number one retailer online and companies trust its services. Amazon has left the model of cutting prices because it was not as profitable as they were expecting. Now they are more focused on expanding and creating their brand, and maintaining a loyal customer base through online shopping experience and other executions. Amazon is the 66th most powerful brand in the world.
Product Diversification
Amazon’s 1990’s slogan, “Earth’s largest bookstore.” Amazon was started as a e-commerce company based on selling books via the internet. But since its inception, it has expanded its business, and has formed a new mold. Today, Amazon sells millions of goods and services, from toys and high definition televisions to server space for other internet companies. Amazon is trying to please both customers and businesses. It is trying to change its business model, instead of just focusing on their B2C platform, they are expanding and creating a better, modern business model focused on both B2C and B2B. Amazon has placed a high stake risk in creating its own hardware. Entering the tablet market was a must. About forty percent of Amazon’s revenues comes from media, books, music, and movies; these formats are moving rapidly to the digital world, the internet. Amazon was late to understand the speed of this transition. Apple which launched the iPad in 2001 and iTunes two years later was not late to the market and quickly became the market leader, which has made it harder for other competitors to come in and take a percentage of their market. Amazons CEO has said that they moved into this market not because of competition, but because they saw opportunity to take over the market. Amazon has been very successful in the race to catch up with Apple in digital media. Amazon introduced an online TV and movie store in 2006, the Kindle e-book store in 2007, and the MP3 digital music store in 2008. Amazon also eyed Netflix and launched an Instant Video streaming service, this service is free for members of Amazon Prime, and it’s now spending hundreds of millions to increase its catalog with TV shows and movies from studios like Fox, and NBC Universal. The music and video stores to Amazons efforts has not been a great success with customers. But this could change, with a new app Amazon has installed and is implemented on the Kindle Fire will give users the impression that most songs, TV shows, and movies are