Question

1. Amazon started its e-commerce business in the book retailing. In what ways, did Amazon create unique value compared to incumbent players? In other words, what were the sources of competitive advantages in the Amazon’s business model?

2. As the company has grown, Amazon decided to open its retail platform to third parties. What are the advantages and risks of this?

3. Amazon has continuously introduced devices such as Amazon Kindle Fire, Fire Phone, Echo etc. Why is Amazon interested in developing ‘products’ instead of concentrating on service?

4. If you are a competitor of Amazon, how would you position your business differently from Amazon? In other words, how can you survive in the online shopping market where the winner-takes-all is significant?

Answer 1

1. Amazon created unique value compared to the incumbent players by offering direct home delivery of books which means that a customer's time was saved to search for the books. Also amazon could offer the books at a better competitive rate due to its overheads being low because there was no cost of maintaining stores or employees to manage a store which reduced costs completely. The major competitive advantage amazon developed is to provide the customer the experience of shopping for various books online and creating a good supply chain to fulfill customer expectations.

2.The advantages of opening amazon's retail platforms are that it makes amazon a marketplace and increases the number of customers visiting the site. It acts as an interface between the customer and retailers. Due to increased customer visits to site and purchases, amazon's profitability has increased as it earns from each sale. Retailers become more dependent on amazon if their major part of sales come through amazon's platform. This gives amazon bargaining powers over retailers. The risks of these are that if retailers are unable to provide quality products, this damages the brand name of amazon as for the end customers, amazon is the provider. Amazon has to maintain retailer quality as well as manage a large retailer base.

3. Amazon's main customers are individual consumers and their mains service is through their platform through which retailers sell the products. Amazon in focused on pushing through products instead of service due to the availability of a large customer base and better profitability with products rather than online services. Amazon's product all target some unique needs of the consumers and hence bring in more profitability. Their efficient supply chain and customer base reduce the costs associated with manufacturing the product and increases profitability.

4. Amazon's main competitive advantage is that it provides a platform for a wide range of products and backs it up with an efficient supply chain. The range of products is very vast and the scale is huge. As a competitor, it is difficult to match the volumes of amazon.Therefore, a competitor instead can focus on providing only quality products or premium products which offer quality. This focuses on the quality over quantity which will bring in premium customers