Amazon

Competitive
Advantage

SYNDICATE 3

Darien Theodric (29119132) . Venna Dwi Purnama ( 29119174) . Rafid Fakhri (29119190) . Zahra Nurhaniza. (29119147)
 About Amazon.com

Amazon is an American multinational technology company based in Seattle, with 750,000 employees It
focuses on e-commerce, cloud computing, digital streaming, and artificial intelligence. It is considered one
of the Big Four tech companies, along with Google, Apple, and Microsoft. It has been referred to as "one
of the most influential economic and cultural forces in the world.

Amazon is known for its disruption of well-established industries through technological innovation and
mass scale. It is the world's largest online marketplace, AI assistant provider, and cloud computing
platform as measured by revenue and market capitalization. Amazon is the
largest Internet company by revenue in the world. It is the second
largest private employer in the United States and one of the world's most valuable companies.

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Competitive Advantage of
AMAZON

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 Defining The Source & Driver of
Competitive Advantage of the Product
In this part, we will be assessing the competitive advantage for two different strategies:

a. Cost leadership strategy

A company compete by provide the lowest price, to create the low price, company should focus on efficiency
of the internal producing process, by producing highly standadized product. The company will be market
leader when the company can provide the customer with quality products at low price

b. Differentiation strategy

It entails development of a product or service, that is unique for the customers, in terms of product design,
features, brand image or quality.

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 The Drivers of Cost Advantage (1)

Cost Drivers

Economies of Scale Owns large warehouses to facilitate large scale of deliveries

Learning and Experience Provide workers with efficient inventory management to ease
effectiveness in delivering goods ordered

Capacity Utilization Operates its warehouse to the fullest stock capacity to reduce fixed
cost related to rent and labors.

Supply Chain Efficiencies Partnered with suppliers to supply its online store with just-in-time
delivery to reduce inventory cost.

Input Cost Only stock goods that are going to be delivered instead of stocking an
amount before selling them.

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 The Drivers of Cost Advantage (2)

Cost Drivers

Production Technology and Design Adopted robots in warehouses to manage inventories.

Communication Systems and IT Use of machine learning for website personalization and
order management

Bargaining Power Amazon website’s high reach and popularity to bargain for
revenue sharing with third-party retailer and space inside
suppliers’ warehouse

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 Assessment on Amazon’s Low Cost Strategy

Cost driver of Amazon becomes critical as:

● Price competition among rival retailers are confirmed rigorous as Amazon competes
with brick and mortar retailers going online such as Walmart and Target.
● Similar retailer competitors also offer the same products as Amazon with comparable
scale.
● Most buyers use Amazon’s product the same way
● Buyers incur low costs in switching from Amazon to other retailers as retailers offer
similar products.

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 Identification of Differentiation Potential
from Demand Side

Simplicity of Customer always want

The Shop, Pay, Deliver the certainty, Amazon has
shopping by Online
Product experience tracking system

Good Service, Profit sharing of

Lower Price product sold

The
Customer
Technological skill, Buying
Customer power, Taste are depends on
Have Needs demographic, and sociological
and Wants condition
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 Amazon’s Dimension of Quality
Dimension of Quality (Performace, Features, Reliability, Conformance, Durability, Servicability, Aesthetics, Percived Quality, Brands) Some of the
dimensions are mutually reinforcing, whereas others are not improvement in one may be at the expense of others. Understanding the trade-offs
desired by customers among these dimensions can help build a competitive advantage.

Amazon’s

Performance : Amazon online marketplace for books but later expanded to sell electronics, software, video games,
apparel, furniture, food, toys, and jewelry.It focuses on e-commerce, cloud computing, digital streaming, and
artificial intelligence.

Features : Amazon has separate retail websites for some countries and also offers international shipping of some of
its products to certain other countries.

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 Amazon’s Dimension of Quality

Serviceability : Merchants sent cartons of their products to Amazon’s warehouses while Amazon took the orders
online, shipped the products, answered queries, and processed returns.

Conformance : At Amazon, product availability was a priority and shipping was completed as close to the time of
order as possible. The company ensured that a first time user became a habitual customer. For instance, if a book
was unavailable, it would try to find a used copy. If the wrong product was shipped, the company made sure it
accepted returns and provided the correct items as quickly as possible.

Aesthetics : Amazon built a personal bond with customers by helping them make decisions through
recommendations of items based on past purchases, user reviews and ratings, and suggestions.

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 Amazon’s Dimension of Quality

Perceived Quality : The website offered customers up-to-date inventory availability information, estimated
delivery date, and delivery shipment notifications. Customers could send products to multiple locations through
different modes of payments such as credit card, wire transfer, or checks.

Reliability : If the wrong product was shipped, the company made sure it accepted returns and provided the correct
items as quickly as possible.To conveniently ship items to customers, Amazon relied on an entirely automated
order management system, closely linked to its suppliers and payment networks.

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 How the dimension of quality could help
Amazon differentiate
Performance Features Serviceability Aesthetics

Amazon provides Amazon reaches a wider Amazon help the seller amazon ensures consumers
consumer easily get the to distribute the product
service area by separate safely and well get products that match their
products they need anytime retail websites for some desires and interests by their
organized
anywhere safely and
countries system
comfortably

Conformance Perceived Quality Reliability

Amazon prioritizes Amazon prioritizes
transparency by trying to
speed and accuracy in
provide detailed
the process of shipping information about
products to consumers product movements
Amazon provides a warranty
for replacement the wrong
product received by
consumers. make Amazon
more trusted

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Value Chain Analysis of Amazon Cost
Leadership Strategy

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 Value Chain Analysis: Amazon’s Activities

Amazon’s activities consist of:

● Technology: R&D
● Operation: Warehouse Inventory
Handling
● Inbound Logistics: Transport
● Service: Online Service & IT
● Packaging
● Marketing & Sales
● Transport

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 Cost Drivers of Amazon (1)

Cost Drivers

Economies of Scale Owns large warehouses to facilitate large scale of deliveries

Learning and Experience Provide workers with efficient inventory management to ease
effectiveness in delivering goods ordered

Capacity Utilization Operates its warehouse to the fullest stock capacity to reduce fixed
cost related to rent and labors.

Supply Chain Efficiencies Partnered with suppliers to supply its online store with just-in-time
delivery to reduce inventory cost.

Input Cost Only stock goods that are going to be delivered instead of stocking an
amount before selling them.

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 Cost Drivers of Amazon (2)

Cost Drivers

Production Technology and Design Adopted robots in warehouses to manage inventories.

Communication Systems and IT Use of machine learning for website personalization and
order management

Bargaining Power Amazon website’s high reach and popularity to bargain for
revenue sharing with third-party retailer and space inside
suppliers’ warehouse

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 Value Chain Analysis of Amazon Cost
Leadership Strategy: Linkages
We identified linkage in terms of how divisions in the company can help cut cost:

1. IT team can help with order and delivery system management to ensure seamless process
2. R&D team can develop automated system for packaging delivery
3. Operation: Suppliers may automatically send goods to the customer to cut delivery time
4. Market and sales team support inbound logistic to reduce the cost in delivering process and product price. By
showing Amazon website’s high reach and popularity.

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 Value Chain Analysis of Amazon Cost
Leadership Strategy: Opportunities for
Reducing Cost
Operation:Warehouse Obtained goods that needed directly from the distributor rather than stocking all the
Inventory Handling goods in the warehouse to reduce the maintaining cost.

Service: Online Service Communicated with the inventory and warehouse-management systems to find the
& IT optimal distribution center

Marketing & Sales Obtained cheaper price from Suppliers and give more interesting promotion to the
customer

Technology : R&D by developing its own technologies to support every departement

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Value Chain Analysis of Amazon for
Differentiation

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 Value Chain Analysis of Amazon for
Differentiation: Value Chain for Firm and
Customer

Division Value Offered

R&D Quick innovation in products offered

Warehouse Inventory Handling Wide product range and effective inventory handling

Transport (Inbound Offer high quality product input

Online Service & IT Quick maintenance service & user-friendly interface

Packaging and Delivery Timely product delivery and flexible delivery capability

Marketing & Sales Good brand awareness and high quality information

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 Value Chain Analysis of Amazon for
Differentiation: Key Differentiation
Variables

Division Key Differentiation Variables

R&D Able to facilitate any technological requirement for Amazon’s product

Warehouse Inventory Fast & reliable inventory management for any products
Handling

Transport (Inbound) Offer high quality material for customer’s loyalty

Online Service & IT Efficient customer support across different geographical areas

Packaging and Delivery Able to speed up product deliveries to customer

Marketing & Sales Good brand awareness and high quality information
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