Competitive Advantage of Amazon

Information technology has revolutionized the manner in which modern businesses operate. As opposed to the past when a bulk of business operations were manually executed, today, many of them are automated. E-businesses are among the ventures that make wide use of information technology. Amazon is a typical example of an e-business entity whose performance prospects can significantly improve if it adopts Big Data technology to find prospective customers. Big Data, which monitors people’s online search behavior, can be utilized to determine the individuals that are likely to buy Amazon products.

Company Background

Amazon.com was founded in 1994 by Jeff Bezos. While Bezos initially thought of naming the company ‘Cadabra’, the company’s first lawyer Todd Tarbert advised otherwise claiming that the name sounded similar to Cadaver, which would not attract customers (Hartmans). While Bezos considered several other names such as ‘Relentless’, he finally settled on Amazon because the name was related to the world’s largest river. Initially, the company operated as a bookstore but later diversified to such products as electronics, clothing, music, and others. In 1997, Amazon issued its IPO. Pertaining to sales volume, Amazon is second largest after Alibaba.com. In 2015, the company superseded Walmart to become the most valuable retailer in the US in terms of market capitalization (Trotman).

Globally, Amazon ranks fourth when compared to most valuable public companies. On revenue basis, Amazon is deemed to be the largest among the Internet companies. The company’s web-based services include renting out of computing and data storage resources commonly referred as cloud computing over the net. Amazon has such a widespread online presences that in 2012, one percent of all data traffic in North America emanated from the company’s data centers (Mcmillan). The company is the eighth largest employer in the US. Amazon is headquartered in Seattle, Washington.

The Company’s Current IT Governance Structure

Being a predominantly an e-business, Amazon employs consumer analytics to study customer behavior. By employing consumer analytics, the company can determine, which product fits which cohort of buyers and their likelihood of purchasing it (Adeïda). In effect, automated recommendations are sent to specific buyers and first-time buyers. The company website has a well-designed online purchase option because of the fact that many of its clients buy goods online. The company also has a well-established automated appreciation system that recognizes and honors its loyal clients.

The Competitive Environment

While many e-retail stores compete with Amazon, Alibaba.com seems to be the primary rival. In terms of sales volume, Amazon.com ranks second after Alibaba.com. Therefore, it can be insinuated that despite the intense competition posed by Alibaba.com, Amazon still occupies a significant market share. Owing to the fact that it is headquartered in the US, Amazon market niche is concentrated in the US. Conversely, Alibaba, its competitor, is based in China meaning it dominates the Chinese market. Based on an article by Forbes, in 2017, while Alibaba’s market share gained 75.18%, Amazon’s recoderd a 26.20% rise (Mourdoukoutas). This discrepancy was partly due to the fact China has the highest proportion of Internet users who spend approximately twenty hours online per week. Owing to this fact, China has become the largest Internet market globally an aspect that is advantageous for Alibaba.

Problem Statement

Online buyers form the bulk of e-commerce clients for companies such as Amazon. As such, retaining such clients who may not purchase directly from physical stores is imperative. Such potential clients include non-Amazon customers who use similar products like the ones sold by the company. Today, many people read literature online because many of these materials are available in e-format. However, a significant number of these readers buy such products from other e-stores other than Amazon. Among the reasons that motivate them to buy from such sellers is the lack of awareness about the competitive prices offered by Amazon. Apart from books, Amazon also sells other products including furniture, electronics, textiles, jewellery among others. However, many people associate the company with books and are not aware of the additional products it sells. With such limited knowledge, their likelihood of buying from the company is limited.

Technology Description

Big Data technology aspires to reach out to the potential buyers who are not aware of the competitive products and affordable prices offered by Amazon. In particular, Big Data technology will correct people’s data online search information, especially those that search for products sold by Amazon yet are unware of this fact. This technology will be beneficial because it will not only gather data about Amazon’s existing customers, but also potential customers who utilize products offered by Amazon’s competitors. With such information, the company can send friendly invitation catalogues to such clients.

Discussion of Competitive Advantage

If Amazon adopts the proposed technology, the sales volume is bound to increase because it will work to attract new clients to purchase from the company. By knowing its potential clients, it is also possible to set out mechanisms to reach out to such customers, by giving them various incentives such as discounts. The technology will also act to create awareness regarding the products sold by Amazon, even to people who do not necessarily buy its products. Furthermore, Amazon will experience high inventory turnover rate. Ultimately, the company’s profitability will also improve due to high sales volume that will result after the technology is embraced.

High-Level Financial Analysis for the Proposed IT Project

Key among the expenses that will be incurred is publicity expense emanating from campaigns to sensitize potential clients about its competitive products and the affordable prices associated with them. Another cost pertains to service fees that will be paid to technicians contracted to integrate the new technology to the company’s system. Notably, it will also be necessary to offer discounts to the new customers identified in order to motivate them buy from Amazon. Such discounts will necessitate selling goods at a relatively lower price, which will be a cost to the company. However, such costs do not rise much worry because they will only be experienced for a short while.

High-Level Implementation Plan

The implementation plan will be entirely automated. After its installation, Big Data technology will automatically collect and analyze data of potential clients based on their online activity. This technology will also send automated recommendations to the identified clients with detailed information about the goods sold by Amazon alongside the prices of these products. If interested, the customer will respond by sending inquiries to the company to get further clarification. After receiving and responding to the inquiries raised by the customers, sales arrangements can then be effected.

Project Plan

Timing

Task

Description

Stakeholder (s)

1st

Month

System upgrading

Installation of Big Data technology

IT department

2nd

Month

Synchronization

Synchronizing the prevailing Consumer Analytics with the new Big Data technology so that they complement one another.

IT department

3rd to 6th Month

System testing

The efficiency of the project will be evaluated to determine its viability

IT department and potential clients

7th

Month

Evaluation

The viability of the project will be evaluated. Specifically, its impact on sales volume and profitability will be determined.

Finance department and sales & purchasing department

8th

Month

Adoption/Dismissal

Based on the results of the evaluation, a decision will be made whether the project is viable and, hence, worth of adoption or it is unprofitable and, hence, should be dismissed altogether

Report to be communicated by the Finance department and sales & marketing department

Change Management Plan

The company employees will be trained on the basics of discriminatory selling which will be necessitated by the introduction of the new technology. Discriminatory selling will be relevant in this case because prices offered to new customers identified will be relatively lower than the ones offered to existing customers. As such, company employees have to be sensitized on how to serve these two cohorts of clients without risking losing any. A primary demerit of this technology is its tendency to stalk on peoples’ online behavior. As such, a possibility of criticism from consumer right groups is possible. To counter such criticism, the company will develop a comprehensive confidentiality policy statement explaining that data collected will be utilized for no other purposes other than promoting its sales.

Recommendations

As Gog Data is a new technology, it is suggested that its reliability is tested on a quarterly basis. Moreover, considering that this is a capital-intensive undertaking, it is also imperative to dedicate a substantial amount of funds to be employed in installing it as well as testing its viability. It is also imperative to seek legal counsel related to the confidentiality ramifications of this new initiative. That way, the company will be well-equipped to counter any criticisms and court sues that may emanate from this technology. It is also critical that Amazon designs its payment option in such a manner that discounted prices option is only available to new buyers as opposed to old customers. That way, old customers will not feel discriminated against for being charged slightly higher than new clients. Therefore, because of the far-reaching benefits of Big Data technology if implemented, the adoption is highly recommneded.

Conclusion

E-commerce has become a norm for many businesses today. With the prevailing rapid development in information technology, businesses are taking advantage of technological information to enhance their competitive advantage. Owing to the fact that the ventures such as Amazon predominantly operate via online platforms, the role of IT in shaping their operations cannot be ignored. To these entities, maintaining old clients, many of whom make their purchases online, meaning they do not physically visit the stores, is imperative. However, a company cannot grow if it does not generate new clients. To achieve this, adoption of Big Data technology is proposed. By utilizing this technology, Amazon will be in a position to study peoples’ online behavior; especially those that search for products sold by the company but are unaware of this fact. By sending friendly invitation catalogues to potential clients identified that way, the possibility of winning them is high. That way, the company’s competitiveness will be enhanced an aspect that will translate into increased sales volume. Therefore, it can be inferred that Big Data technology is viable and Amazon should consider embracing it.

Works Cited

Adeïda, Kenza. "E-Commerce: Amazon Hopes to Anticipate Consumer Purchases with Predictive Analytics." L'Atelier BNP Paribas, 2014, atelier.bnpparibas/en/retail/article/e-commerce-amazon-hopes-anticipate-consumer-purchases-predictive-analytics. Accessed 25 Jan. 2018.

Hartmans, Avery. "15 Fascinating Facts You Probably Didn't Know About Amazon." Business Insider, 9 Apr. 2017, www.businessinsider.com/jeff-bezos-amazon-history-facts-2017-4?IR=T#dissatisfied-customers-can-email-jeff-bezos-directly-and-hell-forward-the-message-along-to-the-right-person-with-one-dreaded-addition--10. Accessed 25 Jan. 2018.

Mcmillan, Robert. "Amazon's Secretive Cloud Carries 1 Percent of the Internet." Wired, 2012, www.wired.com/2012/04/amazon-cloud/. Accessed 25 Jan. 2018.

Mourdoukoutas, Panos. "Alibaba Beats Amazon." Forbes, 23 Aug. 2017, www.forbes.com/sites/panosmourdoukoutas/2017/08/22/alibaba-beats-amazon/#5579872c3f97. Accessed 25 Jan. 2018.

Trotman, Andrew. "Amazon Overtakes Walmart to Become Largest US Retailer." Telegraph.co.uk, 24 July 2015, www.telegraph.co.uk/finance/newsbysector/retailandconsumer/11759785/Amazon-overtakes-Walmart-to-become-largest-US-retailer.html. Accessed 25 Jan. 2018.