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Supply chain management (SCM) is the process of coordinating all of the supply activities of an organisation (e.g. planning, implementing and controlling operations) from its suppliers and partners to its customers.
There are two different areas of SCM. They are upstream and downstream supply chains. Upstream is concerned with transactions between the organisation (Amazon) and its suppliers. Downstream is to do with transactions between an organisation (Amazon) and its customers.
Supply Chain Management
A push-pull-system within the business industry describes the movement of a product or information between two subjects. Essentially the consumers usually “pull” the products or information they demand for their needs, while the supplier which in this case is Amazon “pushes” them toward its consumers.
I feel that Amazon is more of a “push” system. A push system has emphasis on the distribution of products to passive customers. Amazon basically “push” the information about their products to their customers. In addition to this, Amazon currently sends emails to do with promotions and special offers along with advertisements to their customers.
Push & Pull
Amazon is a business which is only available for making purchases online. They have no physical stores which consumers can buy their products from. Since Amazon is only an ecommerce organisation this provides them with the opportunity of many of the activities within the supply chain being conducted electronically. An example would be the reduction of paper documents as order confirmations are sent to consumers via email.
With Amazon taking orders over the internet this means that it will be fast, inexpensive and accurate and therefore resulting in expediting the payment delivery systems.
Although there are numerous benefits to Amazon being an ecommerce business there are some drawbacks which are evident. Supply chains can be very long especially when many internal and external partners are involved. This is especially true for Amazon as they sell thousands upon thousands of products all from different suppliers.
Within the supply chain there can be many benefits. Some are tangible and others are intangible. Some examples of tangible benefits for Amazon would be personnel reduction i.e. Amazon does not have to employ as many workers as they would if they had physical shops to attend to, Maintenance reduction – once again having no physical shops to attend to allows Amazon to save money. The only maintenance work they are concerned with is of the computer systems. An example of an intangible benefit is globalization. This allows Amazon to have customer’s world wide. They are not restricted to people who just live within a short distance from them. Therefore this results in their profits being increased.
Vertical integration vs. disintegration vs. virtual integration
Vertical integration is the strategy of incorporating all aspects of management, production, sales, and distribution within a business in order to become less vulnerable to outside forces.
Virtual integration is where the majority of supply chain activities are undertaken and controlled outside the organisation by independent third parties.
In my opinion Amazon are concerned with virtual integration. This is because they have total reliance on linked third parties and a close relationship with their suppliers. This is because Amazon does not manufacture their own products. They sell other peoples products therefore they need to be in close contact with their suppliers.
Value Networks
A value network is a complex set of social and technical resources. Value networks work together via relationships to create social goods or economic value. There are two types of value networks. Internal and External.
Internal value networks focus on key activities, processes and relationships that cut across internal boundaries, such as order fulfillment, innovation, lead processing, or customer support. Amazon has a very extensive customer support service. They are available on the phone or via their website. Their website is segmented into different sections allowing it easy to find a solution to your query.
External value networks include customers or recipients, intermediaries, stakeholders, complementors, open innovation networks and suppliers.
This week we were asked to investigate Porter’s Five Forces Analysis.
Porter's Five Forces
The threat of substitute products and services
This is to do with the issue of a product being replaced by another product and therefore your initial product is made redundant.
This can be caused when competitors sell similar items as you at very competitive prices. Amazon’s main opponent is Play.com as they sell very similar items such as books, DVDs and music. Play previously had an advantage over Amazon concerning the fact that they offered free delivery on everything although recently Amazon now also offer free delivery on everything i.e. there is no minimum order required to receive free delivery.
Amazon’s main concern is if their customers are able to find alternative products which provide overall savings and are therefore more economical than theirs.
Amazon’s products are easily obtainable elsewhere as they are not bespoke to the customer and are available in many different high street shops as well as other organisations online. Therefore Amazon has to constantly ensure that they have the most avant-garde and up to date products available to their customers otherwise the people purchasing from them will look elsewhere.
The threat of the entry of new competitors (barriers to entry)
This is when a brand new competitor enters your line of business. This may lead to them eroding some of your customers. This is because a new business starting out does not have any existing customers and if they are determined on remaining within the industry they need to swiftly gain a share in the market.
As Amazon is part of a large industry their market is going to be harder to break into. Therefore I feel that not many budding entrepreneurs are brave enough to start a new business which would compete with Amazon. Although Amazon obviously has rivals in the industry I don’t feel these are significant enough at this stage to make an impact on their sales figures.
Amazon is a well established and trusted company, although the threat of new competitors is always a possibility. Therefore Amazon have to keep on top of their game and make the entire shopping experience with them a stress-free, enjoyable task otherwise competitors could home in on this weakness and therefore exploit their new business at the same time.
The intensity of competitive rivalry
As previously mentioned Play.com is Amazon’s main competitor in the UK. Play have broadened the range of products in which they sell and have ventured into selling clothing, gadgets, mobile phones, toys and tickets. They are constantly evolving and keeping up to date with the products which their customers wish to buy. Although Amazon does technically have a bigger range of merchandise available to their customers they currently do not have the option of buying tickets via their website. This could be a potential weakness for Amazon.
Tactics are often used by rivals within the same industry to try to ensure their constancy within the market. Some tactics include reducing prices, increasing the amount of advertising and improving their customer services.
The bargaining power of customers/buyers
This is concerning the amount of power customers have over the company with issues such as prices, quality and services available. Powerful customers will be able to ask for higher quality or improved service at the same price or simply for a better price. Principally it means that the more powerful your customers are the less profit you will make.
Amazon‘s customers don’t possess the power to change the prices, quality of goods or the services available. This is mainly because of the great number of customers Amazon have and therefore the more customers they have the less commercial power they each have.
Amazon want to keep their strong relationship with their customers so they send out frequent emails alerting them to new products which they feel would interest them.
The bargaining power of suppliers
This is to do with the matter of how much power Amazon’s suppliers have. It is concerned with whether or not they can raise prices or reduce services without the fear of losing Amazon’s business. Amazon perceptibly has a large amount of suppliers because of the extensive and diverse range of products they sell. Therefore they would generally have a lot more power over the suppliers than a lot of businesses. Amazon is very successful and suppliers would want to provide Amazon with their goods. This therefore means that Amazon can negotiate a better deal which appeals to them more. If the suppliers are not happy with the prices Amazon is offering them for their goods they will by and large lose Amazon’s business. This would not be an advantageous decision.
Question 7
Amazons terms and conditions are available via http://www.amazon.co.uk/gp/help/customer/display.html/ref=footer_cou?ie=UTF8&nodeId=1040616.
Their terms and conditions are subcategorized into conditions relating to:
- Your use of Amazon.co.uk
- Sale of products to you
- Both your use of Amazon.co.uk and sales to you
- Notice and Procedure for making claims of Infringement.
- Notice and Procedure for Notifying
- Defamatory Content.
By clicking on these subcategories you are directed to more related information. From reading through these terms I feel that they are very reasonable and find no observable problems.
Amazon T&C
Amazon offers a very reputable returns policy. Customers who are unhappy with their purchase can return their item within 30 days for a full refund.
“Our 30-day* returns guarantee means that if for any reason you are unhappy with your purchase, you can return it to us in its original condition within 30 days of the date you received the item, unopened (with any seals and shrink-wrap intact, clothing must have labels attached) and we will issue a full refund for the price you paid for the item”
Returns support centre
http://www.amazon.co.uk/gp/help/customer/display.html/ref=hp_ln_rr_ri/?nodeId=1161002
Returns Support Centre
Returns Support Centre Wizard
The Returns support centre is a step by step guide for returning an unwanted item to Amazon.co.uk. You are asked to sign in using your unique username and password and from there you are guided through the process of making arrangements for a particular item to be returned.
Play.com is Amazon’s main UK competitor. Therefore I have researched Play’s Terms and Conditions and their returns policy.
Play.com T&C's
Play.com Returns Policy
Both Amazon and Play have very similar T&C’s. Although their returns policy differs slightly. Amazon offers a 30day money back guarantee whereas Play only offers a 28 day money back guarantee. Both companies only refund the customer the cost of sending an item back if they made a mistake with their order. Otherwise the customer is out of pocket for returning the item.
Question 8
Encryption is the process of encoding personal information for secure transmission across the Internet.
Registration on Amazon.co.uk is very straightforward and clear cut. The information required by Amazon is all encrypted. By encrypting data it allows them to protect the customer’s personal information from malicious sources. Encrypting data is when the information is rearranged into an order which only allocated people can understand. A secure website uses a lock icon on the bottom right hand side of the webpage (see screenshot below)
Registration
Registration
Secure Lock Icon
Question 9
Cookies are small files which are stored on a user’s computer. They are designed to hold a modest amount of data specific to a particular client and website and can be accessed either by the web server or the client computer. This allows the server to deliver a page tailored to a particular user. Amazon use cookies on their website as this allows them to recognise their customers and provide specific features tailored to them e.g. 1 click purchasing and personal recommendations.
Amazon's Cookies
Question 4
There are some websites which may be classed as competitors for Amazon. These websites include the following:
- Play.com – This website is possibly Amazons largest competitor in the UK simply because they sell similar products at competitive rates and also have the bonus of giving customers free delivery on anything they buy.
- HMV.com- this website mainly sells music and movies but they also sell some books although their range is not extensive like Amazons. They also have the bonus of free UK delivery.
- Whsmith – They sell books, DVDs, music and games etc. In other words they sell all of the core Amazon products. They currently do not have the feature of free p&p on anything. Their minimum spend for free delivery is £15.
- Tesco.com/Asda.com – Supermarket websites are competitors of Amazon as they sell books, CD’s, DVDs and games. Their main market for such products is the parents who perhaps while ordering their groceries online also buy their children a new DVD, book etc.
- Bn.com – All of the above websites are competitors for Amazon.co.uk but for Amazon.com their main competitor is Barnes and Noble.
Visitor Numbers
Amazon
According to www.quarkbase.com:
Unique Visitors: 2,465,831 per month on Amazon.co.uk
Unique Visitors: 69,493,618 per month on Amazon.com
According to http://www.statbrain.com:
Estimated number of visits for Amazon.co.uk = 3,975,862 visits per day
Estimated number of visits for Amazon.com = 8,253,823 visits per day
Amazon v Amazon
Play.com
Unique Visitors: 160,570 per month according to quarkbase.com
Estimated number of visits for Play.com = 885,399 visits per day according to statbrain.com
Amazon v Play
Question 5
To make a purchase on Amazon:
- Type in the web address ‘www.amazon.co.uk’. This then connects you to the UK version of Amazon.
- Search for your item in the search box (Figure A). This then searches through Amazon’s database to find products which contain your key words.
- When you are buying an item you click on the ‘Add to Shopping Basket’ (Figure B). This then adds your item into a virtual shopping basket (Figure C).
- When you have finished searching for your items you ‘Proceed to Checkout’ (Figure D). This then brings the customer to the log in page (Figure E). This is where customers have their own individual username and password. This log in allows the user to quickly proceed in buying the item as their address along with payment method is saved.
- Once Amazon has received your order, they dispatch your item and send it via a courier service.
Figures A-C
Figures D & E
Question 6
Amazon currently sends their customer’s emails about products which they feel would be of interest to them. A new channel for Amazon would be Digital Television Access. I feel that this would benefit the company greatly. If a products advertisement was shown on the TV and a customer was able to buy the product via the red button on their remote I feel Amazon’s business would increase significantly.
Question 1
Amazon is an multinational electronic commerce company which is based in the United States. Their headquarters are in Seattle, Washington although they have international sites available for potential customers in Austria, Canada, China, France, Germany, Japan, Spain and the United Kingdom. Amazon was founded by Jeff Bezos in 1994 and was initially created as an online bookstore. As Amazon became more successful they branched out with the different products they sold. From starting out just selling books they now sell items such as DVD’s, VHS, CD’s, MP3′s computer software, video games, electronics, furniture, beauty products, toys, clothing etc.
Below is a screenshot of the amazon.co.uk website along with an image showing the different international websites Amazon now caters to.
Amazon International Sites
Question 2
Quantitative Information
By searching online the following data is available from www.wikipedia.com
- Amazon Data
Number of Employees:
From this information from wikipedia we can see that in 2008 there were 20,500 employees currently working for Amazon.
Amazon By the Numbers
A recent breakdown of the money involved within Amazon shows the following:
$11.1 billion: Media group sales, 2008
$19.1 billion: Total Amazon sales, 2008
$1.36 billion: Free cash flow, 2008
$630 million: Loss on shipping, 2008
This information is available from http://www.publishersweekly.com/article/CA6635629.html
Financial Times Information
The following information was collected by carrying out a search on the Financial Times website (www.FT.com).
Amazon first quarter sales data (2009):
Amazon underlined its ability to thrive amid the global consumer slump on Thursday, announcing an 18 per cent increase in first-quarter revenues to $4.89bn, and a 24 per cent increase in earnings to $177m.
Excluding the impact of the stronger dollar on the overseas businesses, which account for almost half of its sales, Amazon’s net sales would have grown 25 per cent against the same period last year.
The company’s robust performance is being sustained by its ability to offer prices on goods that compete with conventional discount retailers, combined with free shipping, and the comparatively prosperous demographics of online customers.
The quarter also saw a dramatic 38 per cent increase in Amazon’s sales of non-media products such as electronics, clothing and food, which now account for 42 per cent of worldwide net sales, compared with 36 per cent last year.
Second Quarter Data(2009) :
Amazon saw its sales increase 14 per cent to $4.65bn during its second quarter. The company’s North American sales rose 13 per cent to $2.45bn, while international sales in the UK, France, Germany, Japan and China rose 16 per cent to $2.2bn.
The sales growth was driven by a 35 per cent increase in consumer electronics and other general merchandise sales, rather than the books and media sales upon which the internet retailer built its reputation.
Question 3
Is the web the only channel to market for this business?
Amazon currently does not have any other methods of business other than sales made via their website.
A short history on amazon.com
Jeff Bezos founded Amazon.com in 1994. Originally the business was based out of his garage in his Bellevue, Washington home. A businessman by the name of Nick Hanauer believed in Bezos’ idea and decided to invest $40,000 in the venture. When Amazon first decided to go online, its layout was not as flashy as it is today. In fact, the site looked very plain and unattractive to most visitors, causing the business to start out on shaky ground. A man by the name of Tom Alburg decided to invest $100,000 in Amazon in 1995, which helped the company fund a better looking website and hosting capabilities. When people began purchasing books from Amazon, Bezos was in awe that he had customers from all over the country, not just Washington State, purchasing books.
The complete history on amzon.com is available at http://www.essortment.com/hobbies/historyamazonc_ttas.htm
Channel Chain Map
