Flywheel Philosophy and Revenue Generation
all of their demands at their doorsteps. Nowadays, Amazon becomes the titan in the E-commerce based business industry with its enormous business wings like logistics, retailing, supply chain management, value proposition, unique demand supply chain management and many others. Hardware, data storage, online payments and many other miraculous systems make this entire platform a dazzling one. In this assignment, to discuss all kinds of business activities, environment analysis, issue identification, and recommendations are provided in a brief mode. This analytical provide a bright idea about global e-commerce business operation management.
In this assignment, global e-commerce business operational strategy is discussed in relation with Amazon, where Flywheel philosophy is always followed to make business management and operation-related decisions. This flywheel philosophy is the fundamental component of this Amazon where reduction of price is supported by this organization to attract millions of customers (Dutta, 2017). In this way, Amazon has enhanced its customers base and then generates its revenue in a higher amount after compensating all kinds of costs to make advantages over economies of costs over logistic, telecommunication, and technology-based costs. After completion of a lifecycle when the company reduced its price again the flywheel circulates again to generate more revenues. In this way, Amazon has created great popularity for low-cost products with bulk purchasing. Though this way, in 2016 Amazon had created the total turnover of $137 billion and created a great history in its E-commerce based business platform. Most attractive component of this online platform is the logistic materials where Amazon offered Amazon primes for some selected cities of the world. Customers had got a significant discount along with free shipment facilities in those days. Logistics, hardware and other components of Amazon prime have made this platform very lucrative. It has nowadays more popular rather than UPS or FedEx which are aggressive rivals of Amazon. In the US, Amazon has established near about 200 warehouses, 60 local packaging centers, along with 70 hubs to continue the fast shipment program to its customers. For abroad delivery, Amazon has taken the project Dragon boat also. Through this project, Amazon has delivered its U.S, U.K based deliveries from China-Japan, and other places. Amazon has another significant component to smoothen these e-commerce based products. All of these products are delivered in Asia, Africa, Europe and other continent based countries through Amazon-owned air transportation systems. In this entire system, Amazon and its management authority have emphasized over the data analysis system, where data are derived from shipped products. After delivery, the packages are optimized algorithmically to determine the efficiency and speed of all delivered products and other resources. Through maintenance of all these systems, Amazon has improvised its revenue generation to $11.5 Bn which was double of its previous year (Hu, 2017).
Logistics and Hardware of Amazon
Another exciting component of Amazon based e-commerce system is the introduction of robotic system Kiva to supervise all the activities in their warehouses. Amazon has placed more than 10,000 robots in the U.S to arrange all the fulfillment centers in the U.S. Through such core components, Amazon has attracted millions of its customers and driven its business in a successful manner where Amazon prime is mentioned as the heart of the entire business systems. It is now found to be present that, at present, in the world, 65% Amazon users are now enlisted as Amazon prime members, and nowadays, globally half of the entire household products are retailed by the online retail giant, Amazon.
In this assignment, Amazon, the online most popular retail platform is discussed. In this concept the entire e-commerce marketing strategy of Amazon including its present approach, value proposition, revenue generation model, target audiences, business models along with e-commerce based strategies.
Innovative inventions, proper analysis of requirement of customers and sometimes the creation of new demand within millions of customers of Amazon are the basic approaches of Amazon. In this aspect, C.E.O of Amazon has proposed a great statement that members of Amazon stakeholders found their approach is not a right one from all perspectives, but the approach of Amazon is very likely according to their business strategies. Continuous research, development, innovation of new services and products are the basic approach of Amazon
Value proposition model of Amazon is the super aggregator one. According to this model, Amazon has provided the umbrella to provide space for millions of vendors and its customers to provide a one-stop solution for shopping to the world. Amazon provides easy access to all the global products in a friction-free manner. Amazon has set its value in the logistic world by reducing product cost. In this way, this online platform attracts millions of people and provides them with services with the value of their prices. Amazon has created the value proposition model where customers can buy the massive amount of products at a reduced price and Amazon is the company to play their business at a marginal level cost
Amazon has the revenue model to utilize online platforms where they can sell products from different suppliers. In this aspect, they collect commissions from their considerable number of suppliers when customers buy those products. Amazon has the abroad delivery facilities also. In this course, they collect their revenues from Paypal, Payoneer and other sources. Another significant source of revenue generation of Amazon is the advertisements which are found to be present in their online shopping pages. These revenue models are very much inventive, and it provides a unique revenue generation model to attract millions of customers.
Target Market and Payment System
Amazon has the target market for young generations. Its shown from their database that, older people are their more loyal customers rather than the young generation. In this aspect, Amazon has opened their Amazon original system to provide more offers and facilities to the young generation. According to the management department of Amazon, it is assumed that lold people have more time for online shopping and others, but young generations are too busy.
On the other hand, now Amazon is very cautious to provide cash on the delivery services international basis. Across the world, there are so many countries where the online transaction is not so much popular until now. As a result, they are not so much acquainted with the online payment system. To enhance the offline or cash payment system, Amazon has taken the motto to improvise their payment mode also. Amazon is now also enthusiastic to enhance their product supply timing, the quick delivery system in a small or reduced rate (Wu et al., 2017). These strategies to reach the target market, Amazon have taken numerous steps which had helped them a lot to achieve competitive advantages also over their competitors.
Amazon business model is composed of all of its key components, value chain networks, and numerous stakeholders. Through these model, Amazon has stocked the most significant storage of products along with a reduced price. Moreover, Amazon provides excellent facilities for free shipment where customers can quickly select their required things and complete the payment through online payment systems (Yim et al., 2017).
Amazon has started a great business model based on membership. This e-commerce based company provides free shipment or one-day delivery based facilities to its members, in exchange for small monitory services. In addition to all of these products, Amazon offers numerous facilities line free streaming, online book reading, kindle version of books, along with other facilities. For these facilities, a customer bears small expanses annually as the subscription price. Amazon has created its business model directly based on their entrepreneurship system where investment, revenue sources, along with cost drivers are created very directly with revenue generation system of this company. Amazon invests in such a way where the output is measured, and they know that how to maintain the business sustainably. To cut down the cost driving amount, Amazon filtrated its database and removed their unproductive products within a reasonable span. In this way, Amazon innovatively invests in its business expansion and improvises their revenue generation also.
Value Proposition and Revenue Model
To make the entire system of Amazon based e-commerce platform, a global one Amazon has taken the differentiation strategy (Cui et al., 2017). In this mode, Amazon has taken the business strategy where they provided the scopes to a large number of start-ups also like pet.com and others. It helps them to attract enormous customers through the umbrella term Amazon. To make innovation in the e-commerce platform, Amazon has analyzed the buying behavior to detect the trend of customers (Dutta, 2017). This trend and the vast amount of customers’ behavior helped them to achieve the competitive advantages also. Amazon has analyzed that, nowadays, 50% of consumers of Amazon are loyal customers of Amazon whereas in U.K and U.S.A there is enormous popularity. Such customer popularity along with market share, equity of brands help the Amazon to make rank at the top in the aspect of e-commerce business.
In all e-commerce based businesses the operation management sector is very crucial. On Amazon also the operation management strategy included the goods and products designing, location strategy, stakeholders’ management policies and others (Loewen, 2018). In this respect, telecommunication and online payment gateway system management are other things also. After making all of these things, Amazon has created the overall platform where shopping is effortless.
SWOT analysis is a business analytical framework to measure Strength, Weakness, Opportunities, and Threats of an organization (Vakeel et al., 2017). This tool provides the microeconomic scenario of an organization which is very helpful to measure the competitive place among competitors and decides about steps to repair all the gaps of weaknesses. In this comprehensive discussion, SWOT analysis of Amazon, the leader of e-commerce based business system is briefed here.
The strength of Amazon:
- Maintenance of Porter’s three generic strategies, cost leadership, differentiation of products along with a focus on the launching of unique products is the underlying strength of Amazon.
- This organization has utilized the online platform for the retailing activities provides excellent stability in the global market with the implementation of information technology and e-commerce in their business strategy.
The weakness of Amazon:
- Free shipping system of Amazon creates a danger to achieve profitability.
- Amazon continues its business along with near zero margin-based business where profitability is observed after a massive sell.
The opportunity for Amazon:
- Amazon has the encrypted safe online payment system which helps them to attract more customers.
- This organization has the scope to invite large brands to be sold under their umbrella and generate revenues.
Threats of Amazon:
- Nowadays, cyber hacking is a significant threat for Amazon where most of the customers are avoiding online payment procedure.
- Amazon sells its books at such a low rate which causes legal challenges for this organization by numerous publishers.
- At present many local companies are providing online payment and doorstep supply system in a quick time span. Local companies can do it in a small investment, but it causes depreciation of popularities of Amazon, the global online retailer.
Porter’s five forces analysis is very crucial for Amzon.com.Inc because it is the analytical framework to find out all the external parameters which are influential in the aspect of this e-commerce based businesses (Gordini & Veglio, 2017).
Competitive rivalry is stable in the aspect of e-commerce based businesses because nowadays, there is numerous e-commerce based such platforms are available.
Bargaining power of customers is extreme because customers are now getting a vast range of products from Amazon at a reduced cost.
Bargaining power of suppliers is also a potent force for Amazon whereas at present all the suppliers and product manufacturers are eager to sell their products at Amazon. In this course, Amazon also gets the scope to generate more revenues.
Amazon’s Business Model
The threat of substitutes is a potent force for Amazon because Amazon has opened the platform for e-commerce in such a successful manner. Due to their experiences, Amazon has no such threat because already they had built their market shares, customer base and popularity across the world.
The threat of new entrants is a week force for Amazon because nowadays numerous companies are establishing their online platforms. On the other hand, there are the local market proprietors who are opening their online platforms along with a quick delivery assurance.
In an e-commerce based business of Amazon, there are two types of issues. Primarily, the online mode of transaction is nowadays very dangerous due to the sudden attack of hackers. Amazon also customers have to continue their shipping by putting their credentials on credit card and others. So, it makes people far from Amazon based on online shopping.
In Amazon, the social lives of employees are very pathetic. During the office hours, they have no scope to go for a toilet break also. As a result, employee agitation is created within the organization. It can hamper the reputation of Amazon also (Agarwal & Wu, 2018).
Amazon has to initiate the encrypted mode of payment also to provide a safe and secure transaction experience towards its customers. As a result, more new customers also will be interested in shopping with Amazon. On the other hand, seniors of the management committee of Amazon have to meet with its employees in an average time span to hear all about their problems and to mitigate it. It will help the organization for better production along with enhancement of production also (Rezaei et al., 2017).
Conclusion:
It can be concluded from the above assignment that, E-commerce based platforms has changed the paradigm of shopping globally. People of the entire earth are nowadays experiencing hassle-free shopping experiences and after payment receives their delivery at the doorstep only with the help of such platforms. In this assignment, all the discussions are made in relation with Amazon. Some issues are also detected as the aftermath of discussion. Proper steps will help Amazon-like e-commerce based platforms to enhance more. It will help the world for socio-economic development along with the betterment of human being’s lifestyle pattern.
References:
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Agarwal, J., & Wu, T. (2018). E-Commerce in Emerging Economies: A Multi-theoretical and Multilevel Framework and Global Firm Strategies. In Emerging Issues in Global Marketing (pp. 231-253). Springer, Cham.
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Cui, M., Pan, S. L., Newell, S., & Cui, L. (2017). Strategy, resource orchestration and e-commerce enabled social innovation in Rural China. The Journal of Strategic Information Systems, 26(1), 3-21, Elesevier, Amstardum.
Yim, M. Y. C., Chu, S. C., & Sauer, P. L. (2017). Is augmented reality technology an effective tool for e-commerce? An interactivity and vividness perspective. Journal of Interactive Marketing, 39, 89-103, Elesevier, Amstardum.
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