A business model (also called a business design) is the mechanism by which a business intends to specify a value proposition or a value cluster for targeted customers, a financial model and a market offering (Rayport, 2002). It is a summary of how a company plans to serve its customers and identifies its product offering (Chaffey, Mayer, Johnston & Chadwick, 2003). It involves both strategy and implementation (Wikipedia, 2004). As Amazon.com was being established, the delivery of information, goods, or services to end customers employed one strong business model – Online Retailers of Physical Goods (School of International Business, Qut, 2004). This business model takes title to the newly manufactured products that they sell and often rely on third party providers (School of International Business, Qut, 2004). Like Amazon.com, it needed third party providers, such as Borders and Barnes & Noble, to maintain its sufficient supplies.
When Amazon.com was first launched, Amazon.com was heralded for its feel-friendly culture that drew talented young people to apply for work there (Saunders, 2001, pp. 45) and insisted on hiring the brightest, most intelligent and versatile people who could find, even for the packing room (Spector, 2000, pp.125). He wanted people whom could share his vision and were willing to work to achieve it (Spector, 2000, pp.125). He tried to establish a sense of community due to sharing both hard work and fun with his employees. Although he was able to pay his employees less than market salaries (Saunders, 2001, pp. 48-49), he gave employees ownership in the company and his employees were happy on that.
There are three operational strategies that have helped Amazon.com to enhance its competitive advantage, including cost-leadership, customer differentiation and focus strategies (Saunders, 2001, pp.122-123). The first strategy, cost-leadership is pursued by Amazon.com by differentiating itself primarily on the basis of price. Due to this strategy, Amazon.com always makes sure that it offers the same quality products as other companies for a considerably less price. Their second strategy is customer diffentiation. Amazon.com provideed current and prospective customers with differentiation though design, quality or convenience and Amazon.com always selects a differentiator that is different among the competitor. So, Amazon.com consumers can recognise and differentiate its product from competitors (Saunders, 2001, pp.122-123). The last strategy that it uses, is a focus strategy. This strategy takes one of the two earlier strategies and applies it to a niche within the market (Saunders, 2001, pp.122-123). Amazon.com fouses on outstanding customer service as a niche but not the whole market because each niche has its own demand and requirement.
Values also plays an important role in Amazon.com's succeeding. A value is like a goal and forms an ongoing objective. Amazon.com's values and philosophy are at the center of the organization and often determineed the difference between success and failure of the enterprise (Saunders, 2001, pp.141). There are two strong values that are practised by Amazon.com. These include customer satisfaction and operational frugality. These two values complement Amazon.com's operational strategies in achieving and maintaining an effective competitive advantage and encouraging employee and corporate performance (Saunders, 2001, pp.141-143).
Triage is most thought in terms of medical practice and a good CEO practices strategic triage (Saunders, 2001, pp. 71-73). Bezos himself uses the term “triage� to point to the fact early in Amazon.com’s history that he often has to make tough decisions about how to move the company for continuing growth and ultimate profitability (Saunders, 2001, pp. 48-49). There are four primary drivers for growth:
1. Product focus: Product focus is to make a products or line of products that will be interest by customers.
2. Customer focus: Amazon.com tries to find a way to satisfy cistomers’ needs and expectation through a variety of products and services.
3. Technology focus: Amazon.com attempts to use technology to solve real problems. Now, technology has been used for easy ordering (e.g. One-Click System), securing customer credit card numbers, speeding delivery and new and exciting offerings that draw people to check it out.
4. Distribution focus: Amazon.com tries to expand its business, so it needs to expand its products’ distribution. Now, Amazon.com operates its retail websites not only in the US, but also in Canada, UK, Japan, Germany, France and so on.
1. Saunders, R. (2001) Business The Amazon.com, UK: Capstone Publishing Limited, ISBN 184112155X
2. Spector, R. (2000) Amazon.com: Get Big Fast, New York: Harper Collins, ISBN 0066620414
3. Cox, Barbara G. (2003) Internet Marketing, Upper Saddle River, N.J. : Pearson/Prentice Hall, ISBN 0130336289
4. School of International Business, Qut (2004) Introduction to e-business New South Wales: McGraw Hill, ISBN 77777725
5. Rayport, Jeffrey F. (2002) Introduction To E-Commerce, Boston: McGraw-Hill/Irwin marketspaceU ISBN 0071124926
6. Chaffey, D. (2003) Internet Marketing: Strategy, Implementation and Practice New York : Prentice Hall/Financial Times ISBN 0273658832
Jason Er 10:00, 9 Sep 2004 (EST)
