Aim of the report
Amazon is undoubtedly the largest ecommerce company in the world operating in over a hundred countries and selling a diverse range of products. The company sells goods at affordable prices and has the ability to adjust its marketing strategy in accordance with the market conditions in each of its host countries. The portals of Amazon are visible in the host countries as per their specific needs like showing prices in the currencies of the respective host countries rather than in USD. This portals of Amazon receive millions of orders and process payments amounting to billions. The portals and the gateways of the American ecommerce giant are not only sources of revenue for Amazon but also innumerable companies which market their goods using the portals of the former. The companies which use Amazon portals include small, medium and large multinational companies like Apple and P&G, the leaders in their respective sectors (Amazon.com 2018). However, the portals of Amazon are always under continuous threats from hackers and money laundering groups targeting the immense reserve of customer data and revenue which circulate through Amazon portals (Abel 2018). These illegal activities threaten the customer value creation process of Amazon besides causing immense damage to the revenue generation and market goodwill of the company. The interim report recommends outsourcing some of the operations of Amazon. However, it can be pointed out that considering the immense business operations of Amazon and the impending data theft as well as hacking threats, outsourcing would expose the company before the third party firms. This would only add to the data and security risks to the company.
The aim of the report would be proposing a new business model taking into account four criteria namely, security threats, order-fulfilment procedure, electronic marketing or emarketing and appropriate social as well as legal issues. The research would culminate into making recommendations to the management of Amazon pertaining to the new business model which the research would propose.
The proposed business model of Amazon would take into account four aspects in the light of the context discussed above. The first aspect would be security threats, the second aspects would be procedure which Amazon would take in the new business model, the third would be emarketing of Amazon followed by the fourth concept which would deal with legislations pertaining to all the three previous aspects. However, it would be prudent to delve into the business operations of Amazon in order to provide the proposed business model a stronger base.
Amazon is the largest multinational information technology and communication company based in the United States of America. The business of the company spreads across diverse areas right from ecommerce, cloud computing to payment gateways. The company is listed on the NYSE and NASDAQ, the two top stock exchanges in the world. This listing on top stock exchanges attribute the company with an immense capital base (Nasdaq.com. 2018)(Appendix 1). The financial performance of the company actually reveal business operational strengths in both generating high net income and its increasing asset amounts (Ir.aboutamazon.com. 2018) (Appendix 2). The twenty first page financial statements clearly mentions the compliance with both US income taxes and host countries referred to as ‘foreign jurisdictions’. Amazon has direct presence in twelve countries including its home country the United States of America. The company is presented in other countries where it has no direct operations through its third party distributors which sell Amazon products (Services.amazon.com. 2018) (Appendix 3). The company has a global ecommerce selling guidelines which give in-depth information to all the parties involved in selling and buying products using Amazon portals. Thus, it can be mentioned that the business model of Amazon should take into these aspects.
Security threats and payment systems
One of the most important aspect which the proposed business model should consider would be immense security threats and payment systems of Amazon. Augustine and Asiedu (2017) that the financial resources inflow takes place in two forms, namely capital and revenue. It can be pointed out that Amazon, being a listed company and having presence in twelve countries in form of subsidiaries listed on leading stock exchanges. Thus, it can be pointed out that immense amount of financial capital flows towards Amazon from all the two countries including the US. As far as revenue generation, the Amazon portals serve more than a hundred and eighty countries having loyal customers (Services.amazon.com. 2018). Thus, it can be gauged from the discussion that trillions of dollars of revenue flows towards the company. It can also be pointed out that the portals of Amazon acquire, manage and process colossal sensitive customer data. The customer database and financial data base of the company is under continuous threat from hackers and data theft groups. The international magazine, The Forbes reports that database containing sensitive data of a whopping 120 million customers has been leaked (Forbes.com. 2018). The Walls Street Journal reports third party sellers of Amazon to steal confidential customer information as well as money (McMillan 2018). These two secondary point out that essence of building secured data base and payment system to ensure future security of the data and financial resources of Amazon. The report in the Wall Street Journal is sufficient to discard the recommendation (as per the interim report) of outsourcing business verticals would only invite more data theft threats and the third-party dealers are not strong to counteract the hackers.
The proposed payment gateway of Amazon should form a very important part of its business model since would facilitate flow of cash into and away from the company (in form of payments). The payment gateway of Amazon should be capable of processing both receipts in form of capital as well as revenue. Whenever, the customers would payments to purchase goods online, they would be required to input their identity details which should include identification details mentioned in the document submitted with the bank in order to open account (Aggarwal, Zamani and Christodorescu 2017). The concerned bank would be required to verify the details of customers and send an auto-generated mail to Amazon. The ecommerce will only allow the customer to make payment after receipt of the approval of the bank. If the bank declines to approve the payment, the customer would be blocked from making any payment using the details for unlimited time subject to verification of Amazon. The similar process would be used in the accepting investments and making payments in form of dividend as well as premium (Reaves et al. 2016). The advantage of the multi-layered payment is that it would prevent illegal groups from entering the payment gateway of Amazon.
The order fulfilment process of Amazon should be equally strengthened to ensure security of customers. The customers in order to place orders would have to input details like complete address along the nearest police station. The company would send an auto generated to the police station for verification. The customers would only be able to proceed further only after the address is verified by the police station. It can be pointed out that this method would be very helpful in tracking orders from customers in case they select ‘payment on delivery’ option. Thus, it can also be inferred from this description that order fulfilment process would enable Amazon to reduce fake orders and stealing of customer data.
Order fulfilment process
The twenty eight page of the financial statements of Amazon for the period ended December 31, 2017 gives an in depth insight into the e-marketing strategies of the company. The company markets its goods on its official websites targeting specific customer segments. Amazon has country specific official websites to market its products in the twelve host countries in which it has direct presence. The company promotes its products in countries in which it has no direct presence using third party websites. Amazon promotes its brand name and products by sponsoring events in both its home as well as host countries. The company in additional to its official websites and websites of its third party sponsors also makes use of social media websites like Youtube and Instagram to market its products. Ali et al. (2017) points out in this respect that the e-marketing portals of ecommerce companies are often subject to security threats and intrusion from illegal entities. This statement can be verified by the fact that third party distributors of Amazon have already suffered attacks from hackers and were not able to prevent the attack (Abel 2018). This actually points out the lack of technological power of third party of Amazon to check data theft risks. Thus, the entire e-marketing function should be under the control of Amazon.
The above discussion clearly point out that the security thefts which the gateway of Amazon faces strong social and legal issues. The following are the social and legal issues which Amazon faces due the data thefts and information thefts:
The first social issue which Amazon faces due to data theft is lack of customer trust on ecommerce marketing. Vladlena et al.(2015) mention that data thefts in the ecommerce portals of Amazon lead to loss of customer trusts and repel them from making online purchases. Considering the fact that ecommerce sale of goods have become significant sources of revenue of several multinational companies, it can be pointed out that repulsion of customers from ecommerce purchases hits the revenue generation this companies very badly.
The second issue which can be called as the outcome of the first issue is reduction in the number of goods available to customers which ultimately effects their lives. Prisha et al. (2017) point out that consumers are able to get access to products which are not available in the local market. Moreover, consumers are able to purchase goods from ecommerce websites at affordable prices. Ogbanufe and Kim (2018) point out that in absence of ecommerce websites, the consumers are bound to buy locally available products at higher prices. This ultimately, erodes their saving and increase their expenditure, thereby hampering their standard of living.
The consumers who suffer losses due to data thefts and cash thefts often file cases against the ecommerce companies. Von Glahn and Taulbee (2017) point out that second legal issues, the complex legal procedures of dealing with data thefts. Amazon clearly mention in ist official documents that it abides by legislations in different nations while functioning in the global market (Ir.aboutamazon.com 2018). However, it can be pointed out that the legal procedures of dealing with data theft and online cash thefts vary between countries. The illegal groups have their network spread across countries and use these procedural differences to escape trials. Thus, it can be pointed out that data theft gives rise to serious issues pertaining to law and society.
Conclusion:
It can be concluded from the above discussion that the proposed business model of Amazon should take into account the issue of security of customer data and financial resources. The company should make its portals more secure and reduce hackers to the extent possible. It is not feasible to reduce data theft due to the technologically advanced groups which are involved in hacking.
The following are the recommendations which can be made to the management of Amazon regarding prevention of hacking:
Customer education:
Amazon should educate customers by holding demonstrations regarding measures to be taken while purchasing goods online. The customers should be educated on the necessity of having strong passwords and not sharing passwords with anyone under any situation. The customers should also be advised to change their debit cards’ and credit cards’ PIN numbers if they suspect any sort of fraud in their accounts or any third party observation while using the cards.
Third-party technological training:
Amazon should train the third party agents which sell Amazon products to strengthen their technology. The personnel of the selling partners should be provided with technological knowhow and if required financial help to acquire software to prevent hacking.
Opening of more branches in new markets:
Amazon must open branches in countries where it has no direct presence to control hacking. The map in third figure shows that compared to its global operations, Amazon is only present in just twelve countries which is insufficient to control its global operations. Thus, the ecommerce giant must open more branches to gain stronger control over its markets.
References:
Abel, R. 2018. Scmagazine.com. [online] Scmagazine.com. Available at: https://www.scmagazine.com/home/security-news/cybercrime/amazon-breach-shows-need-for-stronger-third-party-cybersecurity/ [Accessed 5 Dec. 2018].
Aggarwal, A., Zamani, M. and Christodorescu, M., 2017. REMOTEGATE: Incentive-Compatible Remote Configuration of Security Gateways. arXiv preprint arXiv:1709.04569.
Ali, M.A., Arief, B., Emms, M. and van Moorsel, A., 2017. Does the online card payment landscape unwittingly facilitate fraud?. IEEE Security & Privacy, 15(2), pp.78-86.
Amazon.com. 2018. Amazon.com. [online] Available at: https://www.amazon.com/b?ie=UTF8&node=16354394011 [Accessed 5 Dec. 2018].
Augustine, O. and Asiedu, E., 2017. Monetary Versus Fiscal Policy Effects on SMEs Growth in Africa: Evidence from Ghana. International Research Journal of Finance and Economics, (164).
Forbes.com. 2018. Forbes.com. [online] Available at: https://www.forbes.com/sites/thomasbrewster/2017/12/19/120m-american-households-exposed-in-massive-consumerview-database-leak/#13870d6e7961 [Accessed 5 Dec. 2018].
Ir.aboutamazon.com. 2018. Ir.aboutamazon.com. [online] Available at: https://ir.aboutamazon.com/static-files/917130c5-e6bf-4790-a7bc-cc43ac7fb30a [Accessed 5 Dec. 2018].
McMillan, L. 2018. WSJ.com. [online] WSJ.com. Available at: https://www.wsj.com/articles/amazon-coms-third-party-sellers-hit-by-hackers-1491816600 [Accessed 5 Dec. 2018].
Nasdaq.com. 2018. Nasdaq.com. [online] Available at: https://www.nasdaq.com/symbol/amzn/stock-chart?intraday=off&timeframe=5y&splits=off&earnings=off&movingaverage=None&lowerstudy=volume&comparison=off&index=&drilldown=off [Accessed 5 Dec. 2018].
Ogbanufe, O. and Kim, D.J., 2018. Comparing fingerprint-based biometrics authentication versus traditional authentication methods for e-payment. Decision Support Systems, 106, pp.1-14.
Prisha, P., Neo, H.F., Ong, T.S. and Teo, C.C., 2017. E-Commerce Security and Identity Integrity: The Future of Virtual Shopping. Advanced Science Letters, 23(8), pp.7849-7852.
Reaves, B., Scaife, N., Tian, D., Blue, L., Traynor, P. and Butler, K.R., 2016, May. Sending out an SMS: Characterizing the Security of the SMS Ecosystem with Public Gateways. In Security and Privacy (SP), 2016 IEEE Symposium on (pp. 339-356). IEEE.
Services.amazon.com. 2018. Services.amazon.com. [online] Available at: https://services.amazon.com/global-selling/overview.html [Accessed 5 Dec. 2018].
Vladlena, B., Saridakis, G., Tennakoon, H. and Ezingeard, J.N., 2015. The role of security notices and online consumer behaviour: An empirical study of social networking users. International Journal of Human-Computer Studies, 80, pp.36-44.
Von Glahn, G. and Taulbee, J.L., 2017. Law among nations: an introduction to public international law. Routledge.
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