5.
Future Strategies
Online market has become so competitive that Amazon needs to have constant development to have an edge over other rapidly raising competitors. One of the main strategies which it follows wan aggressive acquisitions. In this section, we have identified some steps which Amazon can follow for expanding globally, increasing its operational revenues and future course of action to have a competitive advantage. Amazon has acquired more than 15 companies which has helped its revenue to $ 75 Billion. Further we have identified some steps which Amazon must take as part of future improvements in revenue and expand its operations.
Global Expansion Deloping markets Target youth populated countries E-Retailing Convienence
Operational efficeinency Inter Country depots Delivery Carrier acquizations Levaraging economies of scale Availabilty of product across the region
Services Offering Services as product Using AWS as key to market Using Analytics services for other companies
5.1 Global Expansion
Amazon online retail stores already covers most part of developed and developing countries. Most of high per capita income countries have their own subsidiary whereas other countries which are accessible are clubbed with neighboring countries. They use same website for ordering and orders are delivered through carrier partners. Some notable countries where Amazon doesnt have home country presence are Scandinavian countries, South Africa, South East Asian like Malaysia, Indonesia. These countries have great pockets as growing economies and huge youth population who are more attached to go with internet buying. Opening up delivery centers here will add up to Amazons capability of faster delivery.
With almost 85% of youth living in developing countries, Amazon has to look beyond its current markets and start expanding rapidly into developing markets to get first mover advantage. It has already lost significant market in India because of Flipkart, Snapdeal and Myntra. It should be cautious that it doesnt happen in other developing economies. Usage of Internet which was just over 1.5 billion i.e. just over 20% will be reaching over 70% of world population adding another 3.5 billion people. Most of user of the modern ecommerce will be of youth population which will constitute of age between 15-30 years whose spending capacity is high than older population.
5.2 Inter- Country Regional Depots
One of the core competencies of Amazon is to have less inventory and faster delivery at the same time. As an E-commerce business, practically Amazon has infinite storage space. As transfer of goods from one place to another is becoming very easy by air travel, Amazon can use this as an advantage to set up inter country depots. Neighboring countries units can collaborate with each other and can have a single space inventory in common place where all operations can be carries out. This will be very useful as Amazon can save lot of fixed cost on infrastructure and also increase the product availability across the geographical area. For E.g. Having a Regional Depot in Singapore can serve markets like Malaysia, Indonesia, Thailand, Vietnam rather than having individual depots in each country. Likewise, having a depot in Denmark can easily serve all Scandinavian countries of Finland, Sweden and Norway thought already in place good rood facilities.
Pros
Cost reduction in Infrastructure Maximum product availability across the region Reduced Inventory
Cost of Air transport
Rules and regulation
Not Customized to country level
Cons
5.3 Services
Currently Amazon is dealing mostly physical product delivery like books, electronic devices, and fashion and home accessories. This model is very easily replicable across the world. The only distinction which Amazon has and hard to copy is its global presence. But individual competitor pose a very huge threat to Amazon in their own county like Flipkart in India, Barnes & Nobles in US. These competitor has an advantage of being local and understand their customers better. For Amazon to build on its value, it must enter into field of Service in Informational Technology which has capitalized over these years. One such new offering from Amazon is Amazon Web Services started in 2006. Amazon Web Services are a group of product which are clubbed under single umbrella to be named, but it offers a huge variety from payment systems, data analytics, queuing services, advertising API, data storage, Etc. AWS is estimated to have revenues of around $6 Billion, which is very promising for cloud computing business. Cloud computing is believed to be next cyber age where the data security and usage of physical space efficiently becomes essential. Amazon has to play a bigger role in making use of this opportunity. Platform as Service (PaaS): AWS offers infrastructure facility for cloud computing, which is also done by many IT giants like Microsoft, IBM, SalesForce.com. It is termed as IaaS (Infrastructure as Service). These providers just rent out physical space in computer storage located in remote locations. Amazon to spear ahead in this arena is to move to PaaS (Platform as Service) model where Amazon has to develop set of basic software frameworks from which the user can drag and drop his own requirement. It is more kind of plug and play model, where developer has ease of using his own ideas and create according to his requirement.
AWS moving to PaaS falls in line with long term profitabilty stratergy of Amazon Customer switcing cost is high, so retaining customers by having first mover Long Term advantage now Profitability In addition to Databases and Middle ware, huge service offerings like Data Analyics, Advertising App can be used to genereate revenue Amazon payment services can be used with tie up for the customers
Additional Services
Amazon now as a huge pile of cash, which can be used as investment in data center In event of failure, Amazon can sell the data centers which are fast expanding market Investment until next 15 years.
In addition, Amazon has to manage database of the clients, which can be charged as per usage. Moving to this model gives Amazon a real advantage where cost of changing to competitors in later years goes high for the consumer, making a barrier for them to move.
pros
Huge Customer base - useful for customer behavior anlaysis Current Market Leader Growing Industry and Large Availablity of funds
cons
Market yet in Introduction stage Large investment in fixed asset Data security still a concern
Amazon has to take the risk of investing into PaaS model, as a technology oriented company and has capacity to face information technology challenges, Amazon can have edge over the competitors by introducing this model and have first mover advantage. For this to succeed, Amazon must simultaneously build in huge Data Centers to make sure service quality & speed is maintained also keeping up in pace to meet the demand capacity. Later in the years, AWS in PaaS can be fully converted into paid service, which can be a huge source of revenue for Amazon.
