Opportunities:
If Amazon.com wants to continue expanding, there is a large growing market available to the company. Even though it is involved with numerous of different market segments, there are many more that it has yet to discover. (AMZN, 2000)
With the success of Amazon websites in Germany, United Kingdom, and France, the company has generated global appeal. There have been possibilities of establishing websites in Italy, Spain, and Japan. So far, Japan looks the most promising. (AMZN, 2000)
In addition to global appeal, Amazon has many partnership possibilities. The success of this online company is unlike any other. This success makes it possible for easily establishing partnerships with other companies. (AMZN, 2000)
Threats:
Failing partnerships is a huge threat to Amazon.com. For example, Yahoo dropped Amazon to partner with Barnes & Noble. This does not reflect well on Amazon. If smaller companies see a company like Yahoo drop Amazon, these small companies may not want to take the risk of partnering with Amazon. (AMZN, 2000)
Another threat that Amazon.com may have to worry about is governmental regulations. Government, at any time, may pose restrictions on Internet sales or overseas expansion. These restrictions would greatly affect the well – being of an Internet company. (AMZN, 2000)
Alternatives:
As it can be clearly seen, Amazon.com would like to continue its success. But what happens next? What direction should the company head? Seven different alternatives have come to mind for the marketing aspect of Amazon. These seven alternatives are possibilities for the marketing department to expand the success of Amazon.com.
Doing nothing is always an alternative. Leaving everything as is and giving the company a chance to improve on its own is sometimes a good idea.
Another alternative is global expansion. The international market keeps growing so there will always be room to expand into other countries.
Another possibility is further expanding partnerships and alliances. Amazon.com has had successes and failures with partnerships. There is the successful partnership with America Online and the failed partnership with Yahoo. Yahoo dropped Amazon and is now partners with Barnes & Noble. Alliances have worked in the past by bringing new customers to the website.
Amazon.com has been criticized for over – expansion of the company. Discouraging further growth is an alternative to take into consideration. This alternative would allow the company to focus on current businesses and markets. (Motley Staff, 2000)
Books were the original product for Amazon that enabled success. Expanding into other areas was smart, an alternative could be to eliminate these partnerships and go back to the original focus of the company.
Technology is always changing and in order to keep current, the merchandise needs to be updated. Because of this, another alternative could be to upgrade merchandise to appeal to this new technologically aware market.
The last alternative for Amazon.com is to establish actual Amazon stores worldwide in addition to their online websites. Having a physical store location may encourage people without computers to shop at Amazon.
Not all of these alternatives will be used to help Amazon. Only the alternatives that are felt to be the most effective will be recommended for implementation.
Recommendations:
There were great measures taken to review these alternatives. Meetings were held with all of the different departments involved in Amazon.com. The finance department was questioned about the budget for marketing and which of these alternatives would be the most cost effective. If there was any software change involved with any of these alternatives, the information systems department was made aware and consulted. They reviewed the alternatives and made it known which were the smartest to recommend from an information systems standpoint. The production department also had input in reference to these alternatives. Their agreement or disagreement was very important, especially if the physical store alternative was chosen. Anything involving the hiring or firing of personnel went through the human resources department. It was necessary to find out if the manpower associated with these alternatives was already in the company or needed to be hired. International expansion could be a big factor in the success of Amazon.com. Therefore, the international business section of Amazon was an important aspect in the evaluation of these alternatives.
After reviewing all of the alternatives listed with all departments of Amazon.com, it has been decided to recommend the following three alternatives. We recommend that Amazon should expand its partnerships and alliances. These expansions will keep Amazon’s name circulating throughout the Internet. Most of Amazon’s customers become repeat shoppers. This mainly is due to the company’s variety of products and its excellent customer service. If they see the Amazon.com symbol on a different website or know of a company associated with Amazon.com, they are more likely to go to the site and make a purchase.
The second recommended alternative is upgrading merchandise to appeal to the ever – changing technologically driven market. In 1999, the Amazon.com classical music store enhanced its recommendation service and added features to promote independent artists. Also in 1999, Amazon dedicated an area of its music store to download songs from major established performers. Amazon.com was the first online music retailer to feature this service. This is an example of upgrading merchandise. Amazon has turned music into downloadable music and it is now time to turn books into downloadable books. (Amazon.com, Inc.)
The third recommended alternative is global expansion. On the international front, Amazon.com has established websites in the United Kingdom, Germany, and most recently France. According to the chart titled America’s Growing Market Opportunity, the company has had great success overseas and there needs to be further expansion. The international business department of Amazon.com has done research on international expansion. The research has focused on new sites in Italy, Spain, and Japan. The most promising new site, based on the research, is Japan. (Amazon.com, Morgan Stanley)
Implementation:
It is not enough to simply make recommendations to improve the well – being of a company. Each recommended alternative needs an implementation plan. These implementation plans must address the departments involved, the actual plan itself, and a time – table of when things will occur, and most importantly a single champion. This champion will make the plan work as their top priority.
In most cases companies try to broaden their lines, not narrow them. Amazon is no different. Amazon.com is constantly forming new partnerships and alliances to attract new customers. It formed an alliance with ofoto.com, an online photography service. The newly acquired electronic line of business has become the second largest category behind books. Their best seller is DVDs. Amazon.com wants to form more alliances with companies like Toysrus.com and enter into new product categories. Selection is considered an advantage and not a disadvantage. Amazon’s goal of being a one – stop shop for everything online will bring the company great success. After carefully researching the history of partnerships and determining what made them a success or failure, new partnership plans will be implemented. (Ries, 2000), (Bloomberg News, 2000), (Amazon Quarterly Report, 2000)
Recently, Amazon.com has developed many high – powered partnerships and alliances. Amazon has a promotional alliance with America Online where Amazon products are available across several AOL brands. There is also an Amazon link on the AOL homepage. Amazon paid approximately 19 million dollars to AOL for this service. Although costly, we believe further alliances are one element in creating future profits. Amazon has a partnership with Microsoft to deliver e – books online, which will be discussed later in this paper. The finance department has assured us that there is funding available for these partnerships. The department feels that Amazon’s main concern is profitability and more partnerships are a step in the right direction. Amazon already has America Online and Microsoft as two huge partners. We feel the next step should be to create partnerships in different high – powered market segments. (Balluck, 2000)
Plans have been made to talk with Nordstrom. Talks will begin in 2001 allowing time for further research. We need to establish a synergistic relationship with a company where both will benefit from this partnership. When visiting the Nordstrom website, the customer will see a link to Amazon.com for further information on the products. In exchange, Amazon.com will display a banner advertisement for Nordstrom. For every sale at Amazon from the Nordstrom site, Nordstrom will receive 5% of that sale. Amazon will receive a 10% commission for sales through its website.
Amazon has also targeted Nike with the same kind of deal. Nike will have a link to Amazon for books or information on sports. Amazon, in exchange, will have an advertising banner for Nike on the website. Nike, just like Nordstrom, will receive a 5% commission and Amazon 10%.
Both of these partnerships should be established by June 2001. We expect to see an overall revenue growth of 5% by June 2002, from commissions.
The key to enabling these two new partnerships is establishing a synergistic relationship. Synergy is the concept that joining the efforts of certain parts of an organization will generate results greater than the sum of their individual efforts. When Nordstrom and Nike establish partnerships with Amazon.com., all three companies will benefit. (Jain, 2000)
The second implementation plan deals with upgrading merchandise. Amazon has so many different partnerships that it would be too hard and very costly to upgrade everything. We have decided to start the upgrading with Amazon’s best selling products, books, music, and movies. Music has gone from cassettes and CDs to downloadable music. Amazon.com has a section of its website specifically for downloading music. Movies have gone from videos to downloadable video clips. We have decided that the next step should progress from books to e – books.
As stated in a previous paragraph, Amazon has created a relationship with Microsoft. This partnership will lead to Amazon opening an online e – bookstore using the Microsoft Reader format for e – books. Consumers will be able to buy and download these books. Dick Brass, Vice – President of Technology development for Microsoft, says: “Amazon is the largest vendor of books on the web and could be the largest vendor of e – books. They could help make e – books happen real fast.” (Gates, 2000)
There are many advantages of e – books over printed books. E – books have an incredible storage capacity. One disk will hold everything needed. E – books are also very versatile. They give the reader the ability to move/ copy important sections of the book from one place to another, making it easy to take notes. An electronic dictionary is included on each e – book, allowing the reader to click on the word and get the definition. (Ochoa, 2000)
E – book online stores will take some time to open. We are planning to establish these stores by March 2001. These stores have the potential to be very successful so we do not want to rush things. Advertising for e – books will be done on the radio and through word – of – mouth, the usual Amazon.com advertising strategy. We predict that with e – books running at a cost of 3 – 7 dollars, we forecast revenue of about 750 million dollars within the first three years. These estimates may be conservative, the e – book industry shows great potential. It is a smart choice for Amazon to get into this business. This is the next step necessary to keep Amazon.com technologically updated. (Gates, 2000), (Hawkins, 2000)
The third imp