Amazon Company’s Business Management Strategies

Digital Winners and Losers

The digital revolution, alongside its widespread disruption, is creating a significant divide between business losers and winners. Winners embrace or adopt digital technology and utilize it to improve their business procedures in an attempt to gain profit and revenue benefits (“Competing in 2020,” no date). Amazon is a multinational digital organization headquartered in Seattle, Washington. It is an e-commerce company that focuses its operations on several technical aspects such as digital streaming, artificial intelligence, and cloud computing (Izogo and Ozo, 2015). It is indisputable that Amazon Company is considered a winner based on its performance since its establishment in 1994. The success of this company stems mainly from its innovative forms of technology and practices.

Amazon has integrated several innovative technologies into its business practices. Echo is an example of Amazon’s invention, which is regarded as a huge investment that brought about impressive business success for the e-commerce giant. In 2017 alone, Amazon realized sales of over twenty-two million (“Competing in 2020,” no date). Apart from the huge sales that the organization makes annually, it is also considered a winner in providing support for the communities and other organisations (“Competing in 2020,” no date). This section provides a comprehensive evaluation of the factors that distinguish Amazon as a digital winner.

Elements that Distinguish Amazon as a Winner

Data mining is a procedure used by organizations to transform raw data into useful information. It is a technique used to uncover correlations, trends, and patterns by analysing large data amounts stored in repositories, including storage devices and databases (Zatari, 2015). Data mining is a crucial feature of advanced technologies, such as artificial intelligence (AI), natural language processing (NLP), and machine learning. Some of the essential data mining steps include

  • Defining an organization’s hypothesis or assumption;
  • Distinguishing all information sources pertinent to the postulation;
  • Identifying data points from the information sources that require testing to reject or validate the developed hypothesis;
  • Using data mining procedures, including correlation analysis to examine statistical models that establishes appropriate connections with data points;
  • Interpreting and reporting outcomes and utilizing gathered insights to design the firm’s business decisions.

Having multiple consumers globally, Amazon is categorized among the greatest online stores providing amazing services and products to its clients. The company has outstanding consumer databases, and they typically utilize information stored in these databases to establish strong relations with their clientele base (Zatari, 2015). By evaluating and surmising useful data regarding its consumers, the enterprise designs appropriate promotion-related and product enhancement strategies. Amazon also utilizes data mining approaches to improve its product marketing approach to gain a competitive edge against its rivals.

Amazon utilizes various data mining techniques to understand its consumer purchasing patterns to improve its sales. Some of the commonly exploited data mining approaches by the company include basket analysis and remote computing methodologies. According to Mar (no date), the basket analysis approach involves evaluating large sets of data, including consumers’ purchase history, to identify product categories and the commodities or services likely to be purchased. Amazon’s remote computing services focus primarily on distinguishing and assessing consumers’ wants through practical research to implement strategies that seek to address these needs. The company’s marketing strategy developed through this data mining technique centres essentially on three elements: offering an extensive range of products, providing cost-competitive commodities to consumers, and website optimization.

Secondly, Amazon expanded its business scope based on its consumers’ needs; its competitive advantage is no longer structured on the grounds of conventional industry boundaries. The company’s mission is to be a “client-focused organization,” and according to Schmidt (2019), this mission statement guides any decision implemented by Amazon. Amazon’s operations are guided by four major precepts: dedication to operational excellence, long-term thinking, client obsession, instead of competitor focus, and the desire or innovation.

Some of the elements that typify the enterprise’s innovative and consumer-centric operations include

  • Pricing and loyalty: Amazon’s Prime Membership initiative, including Prime Day and Digital Day, offers various benefits, including fast delivery and music and video content. Through its Amazon Pantry and Subscribe and Save initiatives, the company offers a discount for repeat or bulk purchases. Its point system and payment cards also provide additional benefits (Schmidt, 2019).
  • Supporting consumers’ decisions: Amazon is a pioneer in consumer reviews, and over the years, the company has initiated strategies that aim to improve its Q&A and personal recommendation system. Personal Stylist is an example of an application developed by the company to help consumers choose between two outfits (Schmidt, 2019).
  • Promptness and convenience: Amazon utilizes various innovative tools, including algorithms to make deliveries to consumers within one hour to two days at most.
  • Platform-specific: Based on the knowledge that shoppers have varying motivations for every category, the company has expanded its lucrative categories such as outdoor equipment and grocery, in the form of microsites, including Amazon Go (Schmidt, 2019).

Other important innovations by the enterprise include Prime Reading, an unrestricted reading portfolio for its US Prime members, Alexa (Amazon Echo), its AI platform which facilitates a seamless shopping experience, and Amazon Surprise, a direct-to-consumer platform (Schmidt, 2019).

Thirdly, Amazon uses the platform business model to create value by facilitating trade between interdependent grouping and allowing them to develop beyond the narrow corporation’s confines. A platform relates to a business model that generates value by enabling exchanges between two more interdependent entities, usually producers and consumers (Sadq, Hama and Nuraddin, 2018). To initiate these exchanges, platforms mobilize and create an extensive and scalable network of resources and users accessible on demand. Amazon operates a platform business model as its primary model, comprising multiple business units. This multi-sided platform comprises several supply-side players and Amazon clientele on the demand-side. Units including the Advertising business and Prime are highly tied to the company’s e-commerce platform. For example, the latter (Prime) helps the corporation to reward repeat consumers, thereby promoting its platform business. Other units include Prime Video, Kindle, and Alexa.

To conclude, winners typically embrace or adopt digital technologies and utilize these innovations to improve their business processes to gain profit and revenue benefits. Amazon is an e-commerce company that focuses its operations on several technical processes, including digital streaming, artificial intelligence, and cloud computing. Various factors distinguish Amazon as a digital winner within the marketplace. These elements include the use of data mining techniques to uncover consumers’ purchasing trends and improve their experience and the expansion of its business scope based on the specific needs of its consumers. The company also utilizes the platform business model to generate value for its customers.

Digital Transformation

Digital transformation relates to the integration or adoption of digital technology into all business areas to restructure an organization’s operations and its value delivery strategy to its consumers. As a primary strategic initiative, the need for digital transformation, particularly in during the COVID-19 pandemic’s wake, has increased significantly (Boulton, 2020). According to Boulton (2020), 59% of respondents in an IDG Research business impact survey involving 373 information technology (IT) decision-makers reported that pressures arising from the COVID-19 epidemic are currently accelerating the digital transformation efforts. The survey further revealed that despite budget constraints due to the COVID-19 pandemic, global digital transformation services and technologies’ expenses are predicted to grow from 10.4% in 2020 to approximately $1.3 trillion (Boulton, 2020). Companies are currently facing several challenges and opportunities due to digital transformation.

Some of the commonly identified challenges related to digital transformation include recruitment or professional development, competition, organizational culture, digital expertise and IT infrastructure, and corporate structure. The opportunities linked to digital transformation include efficient resource use, exploring new technologies, improved consumer behaviour, product customisation and development, and improved supply chain operations (Vial, 2019). This section will focus primarily on two major challenges (recruitment and professional development and competitors) and one main opportunity (consumer behaviour).

Challenges and Opportunities

Digitalization of a company’s operations is necessary for it to remain competitive in the production arena. As businesses continue implementing digital transforming technologies and reshaping employees’ experience, they encounter various challenges in their digital transformation journey. Competition is among the greatest challenges that companies face due to digital transformation (Nadkarni and Prügl, 2021). It so happens that, for businesses to ensure their survival in the current digitally connected world, they ought to be willing to embrace digital transformation to stay more relevant in the entrepreneurial field.

Amazon is a retail industry that is continually transforming the business world with innovations; this includes its Internet pervasiveness and various technological platforms, including its omnichannel advent. Since consumers are more empowered than ever before in the current retail world, Amazon has tried to adapt well to the new digital transformation world with its many innovations while at the same time staying true to its fundamental value proposition: convenience and price (Schmidt, 2019). However, they are faced with the greatest competition from Walmart, which is posing threats with its recently bought Jet.com, which was dubbed a potential killer to Amazon (Schmidt, 2019). Walmart is investing heavily in technology, and based on current evidence, this technological investment is more likely to threaten Amazon’s business.

Another major challenge impacting the effective adoption of digital technologies is professional development or employee recruitment. According to Nadkarni and Prügl (2021), human capital represents a significant obstacle encountered by many organizations during the digital transformation process. Vaska et al. (2021) cite the underlying skill gap among employees as a primary challenge encountered by businesses during this procedure, arguing that this particular aspect may lead to increased resistance to change by the workforce. Deploying new technology is typically accompanied by the need for reskilling and training, which, according to Vaska et al. (2021), serves as an opportunity to improve workers’ critical thinking and problem-solving expertise. Organisations which encourage employees to experiment with new ideas are 1.7 times more likely to successfully implement technological changes within their operations than their counterparts (Booth, Mohr and Peters, 2016). A human-centric digital transformation approach is therefore crucial in facilitating an institution’s innovation process.

Although Amazon’s organizational culture is human-centric, it encounters significant hiring challenges, particularly when it comes to recruiting and promoting employees to management positions. Great managers are well-organized, hire resilient candidates, and provide teams with adequate coaching and support to improve their performance, counter progress-related barriers, offer additional resources, provide pressure relief proactively, and ensure workers achieve their goals (Adler, 2015). Contrarily, weak managers succumb to pressure, are reactive, recruit wrong people, overreact when things go wrong, play favouritism, and are extra demeaning and demanding; these features typify Amazon’s managers (Adler, 2015). These features negatively impact employees’ performance and increase resistance to organizational change.

Consumer behaviour is an opportunity that companies can exploit to reap the benefits of digital transformation. With the e-commerce technological advancements, the path to making purchases has become more complex than before. Creating frameworks or strategies for comprehending consumers’ journeys is therefore crucial; this can be done through data mining and modelling approaches (Nadkarni and Prügl, 2021). It is vital that companies accurately monitor their consumers’ behaviour to ensure they provide the appropriate offerings at the right time and on the right platforms or devices (Nadkarni and Prügl, 2021). Amazon continually implements innovative approaches, including data mining techniques, to monitor their clients’ purchasing trends and devise strategies that aim to improve their experiences. The company can adopt a more holistic approach to its data mining techniques to improve its operations and processes; this strategy should be grounded on collaboration between units and employees.

To conclude, digital transformation signifies a radical rethinking of how a company utilizes technology, procedures, and human capital to fundamentally redesign its business performance. It emphasizes the foundational transformation in how an enterprise delivers value to its consumers. Organizations are currently facing several challenges and opportunities due to digital transformation. Some of the common challenges include recruitment and professional development and competition. Consumer behaviour represents a major digital transformation opportunity that could be exploited by businesses. Amazon should adopt a more holistic approach to its data mining techniques to improve its operations. The company should also ensure it hires personnel with the effective managerial capabilities.

References

‘Competing in 2020: winners and losers in the digital economy’, (n. d.) Harvard Business Review. Web.

Izogo, E. E. and Ozo, J. U. (2015) ‘Critical evaluation of how well-placed Amazon is to sustain its historical in online retailing’, British Journal of Marketing Studies, 3(6), pp. 31–42. Web.

Mar, B. (n. d.) ‘Amazon: Using Big Data to understand customers’, Forbes. Web.

Sadq, Z. M., Hama, S., and Nuraddin, S. (2018) ‘Analyzing the Amazon success strategies’, Journal of Process Management New Technologies, 6(4), pp. 65–69. Web.

Schmidt, S. (2019) ‘Amazon’s competitive advantage and how retailers are fighting back’, MarketResearch, 20 November. Web.

Zatari, T. (2015) ‘Data mining by Amazon’, International Journal of Scientific and Engineering Research, 6(6), pp. 867–868. Web.

Adler, L. (2015) Amazon doesn’t have a culture problem; it has a hiring problem. Web.

Boulton, C. (2020) What is digital transformation? A necessary disruption. Web.

Booth, A., Mohr, N., and Peters, P. (2016) The digital utility: new opportunities and challenges. Web.

Nadkarni, S. and Prügl, R. (2021) ‘Digital transformation: a review, synthesis, and opportunities for future research’, Management Review Quarterly, 71(2), pp. 233–341. Web.

Schmidt, S. (2019) ‘Amazon’s competitive advantage and how retailers are fighting back’, MarketResearch, 20 November. Web.

Vaska, S. et al. (2021) ‘The digital transformation of business model innovation: a structured literature review’, Frontiers in Psychology, 11, pp. 1–18. Web.

Vial, G. (2019) ‘Understanding digital transformation: a review and a research agenda’, The Journal of Strategic Information Systems, 28(2), pp. 118–144. Web.

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