Business Strategy

Five Industry Forces

Rivalry	High- There are emerging competitors in online retail markets like Alibaba, Walmart, eBay, etc	Use IS to continue innovation with products and services
Threat of New Entrants	Low- The online e-commerce market is open, but brand development is costly	Use IS to establish more entry barriers
Substitute Products/Services	Medium- Other businesses are providing low switching costs like Etsy, AliExpress, Target, Walmart, etc	Improve product quality and customer experience
Bargaining Power of Suppliers	Medium- Amazon has a growing network of suppliers	Improve relationships with suppliers
Bargaining Power of Customers	High- Customer satisfaction can cause prices to increase or decrease	Use IS to improve customer service

   

This industry is highly competitive and profitable. Amazon implements its business strategy and applies information systems to maximize its financial performance as a dominating force. 

Competitive Strategy

    According to Porter there are four main strategies that a company can pursue to gain a competitive advantage: low cost industry-wide, differentiation industry-wide, low cost focus, and differentiation focus. Amazon strategically employs differentiation on an industry-wide scale by offering unique and exclusive services such as their Amazon Prime subscription,  which includes expedited shipping, Prime Video, Prime Reading, and Prime Music. Additionally, Amazon serves various customer segments through online and physical stores, focusing on selection, price, and convenience. They also offer programs for sellers to grow their businesses, enable content creators to publish and sell content, and provide technology services through AWS, which has become a significant player in the cloud computing industry

    Amazon tactically addresses threats from Porter’s five forces by creating formidable barriers to entry through a combination of a strong brand reputation, extensive distribution networks, and substantial initial investments in technology and infrastructure. To mitigate the bargaining power of buyers, Amazon leverages customer loyalty programs such as Amazon Prime and provides an unparalleled selection of products. They manage supplier relationships through a diverse network and the introduction of private-label products. Amazon’s diverse range of products and services, coupled with a commitment to innovation, reduces the threat of substitutes. To navigate competitive rivalry, Amazon continually invests in operational efficiency and supply chain management, ensuring a cost advantage over competitors.  

Value Chain

    Value chains consist of primary and secondary activities. At Amazon, this includes inbound logistics, manufacturing (only for Amazon Basics), outbound logistics, sales and marketing, and lastly, customer service. Inbound logistics include receiving inventory, coordinating with sellers that do fulfillment through Amazon, developing software (AWS), and more. Manufacturing consists of producing products, quality control, and managing their raw material inventory. Outbound logistics consist of package sortation and fulfillment so that they can be shipped. Marketing and sales are responsible for promotions, overseeing different creator programs, and managing orders. Lastly, customer service is in charge of taking care of returns, product warranties, and product issues. Amazon makes it very easy to contact them through their app.

Business Processes

    The Using MIS textbook describes a business process as “a network of activities that generate value by transforming inputs into outputs.” Because Amazon is such a large company that participates in many different industries, they have a lot of different business processes. They participate in the material ordering and manufacturing process for their own brand, AmazonBasics. As an online retailer, though, Amazon goes through inventory, sales, and fulfillment/sortation processes. 

    One structured process that Amazon goes through is sorting orders. After order fulfillment, where the items are packaged and labeled, they are then sent to sortation facilities, where they are grouped together by zip codes and towns. This is done through scanning packages, which are done by people. After scanning, employees are told where to place the packages, which then go onto trucks and are delivered. This makes shipping more efficient and effective, so they can continue to advertise their signature one and two day shipping.

    One dynamic process that many companies facilitate, including Amazon, is marketing. The marketing process is considered a dynamic process due to its flexible and adaptive characteristics. This area is always changing, and different approaches are needed for different audiences and age groups. Marketing for Amazon is done through many different social media platforms, as well as paid ads and push-publishing. Interestingly, they also have programs like Amazon Storefront and Affiliate that offer commissions to have current customers market products on Amazon to their own audience and platform. These are done on the Amazon app and website.

Amazon Order Sortation

Amazon Storefront

Information Systems

    Amazon utilizes various information systems to streamline its operations and enhance customer experience. In the structured process of order sortation, Amazon relies on custom-developed software tailored to its specific needs. This software efficiently organizes incoming orders within Amazon's fulfillment centers, optimizing the sorting process based on factors such as location, shipping method, and product type. By leveraging this IS, Amazon ensures that orders are processed accurately and swiftly.

    In the dynamic process of marketing, Amazon utilizes its App and Website as key information systems. These platforms function as dynamic marketing hubs, deploying personalized recommendations, targeted advertisements, and promotional campaigns strategically to engage customers. Through sophisticated algorithms and data analysis, Amazon's IS tailors marketing content to individual preferences, crafting a personalized shopping experience for each user.

Product or Process Implementation

    From our research of Amazon, we learned that Amazon prides itself on its quickness, efficiency, and lower costs of matching and delivering products from suppliers directly to customers. Based on this key finding, we noticed that during the sorting and fulfillment  processes, Amazon uses “Same-Day” Facilities to give the corporation a competitive advantage. Same-Day Facilities are described as smaller buildings that are located closer to Metro Area’s, a hybrid work environment composed of employees and streamlined conveyor belts with smaller footprints to maximize speed and efficiency. (Harrington, 2023) 

    In addition, Amazon’s Same- Day facilities also have a unique system for picking and packing products, which decreases the average process of picking and packing from a little over an hour to completing this process in just 11 minutes in comparison to the average fulfillment center. Amazon does this by sending products directly to packing stations momentarily after sorting the items, reducing the overall time it takes to prepare each item for delivery. Through the enhancement of these processes, Amazon leads the nation in customer satisfaction within the industry, providing a fast and more efficient way to shop online.