AMAZON

Company’s profile
Amazon.com Inc. Was founded in 1994 in Washington and Amazon.com website became first
active in July 1995 to become the largest online retailer in the world to offer Earth’s Biggest
Selection in less than two decades. The e-commerce and cloud computing company earned an
operating income of USD4.2 billion, USD4.1 billion, and USD12.4 billion for 2016, 2017, and
2018 respectively (Annual Report, 2018). Forbes lists Amazon as the worlds 4 th most valuable
brand with the brand value of USD 97 billion and according to BrandZ ranking Amazon is the
most valuable brand in the world with the brand value as high as USD 315,50 billion (Annual
Report, 2018).

The e-commerce giant employs approximately 647,500 full-time and part-time employees
referred to as Amazonians (Annual Report, 2018). Amazon has declared its adherence to four
principles: customer obsession rather than competitor focus, passion for invention,
commitment to operational excellence and long-term thinking. These principles represent
sources of Amazon’s competitive advantage.

STRATEGIC PLANNING

1. AMAZON’S MISSION

 Mission statement
“We strive to offer our customers the lowest possible prices, the best available selection, and
the utmost convenience.”

 Market oriented mission statement

“Our vision is to be Earth’s most customer centric company; to build a place where people can
come to find and discover anything they might want to buy online”.

2. OBJECTIVES AND GOALS

  Business objectives
To seamlessly link the digital and brick-and-mortar shopping experience in order to be part of
every single purchase made.

 Marketing objectives
To learn as much about consumer shopping habits to deliver better experiences to customers.

3. BUSINESS PORTFOLIO
Amazon Portfolio is a new feature designated to help advertisers manage & track their spend in
Sponsored Products & Sponsored Brands. According to Amazon: Campaign portfolios offer a
new way to create custom groupings of your Sponsored Products and Sponsored Brands
campaigns.

GROWTH SHARE MATRIX

1. Cash Cow
Amazon has generated a great deal of cash through the sale of its e-books, making them
a cash cow for the company. The company has recognized the potential held by
electronic books, and provided its readers with low cost options for people seeking
books. Kindle has supported the company to use the e-books segment as a cash cow.
Miller and Bosman (2011) have observed that the sale of e-books has significantly
increased over the years, supported by the increasing number of users of Kindle. It has
been further speculated that the number of e-book readers will increase in the coming
years, making the e-books a high value item for Amazon. Another product that is cash
cow for Amazon is its audio books which have also achieved significant sales. In
addition, movie on demand has also generated high amount of cash and holds a
significant market share in the industry. The example of IMDB is another case of cash
cow as it helps the company to manage the sales of its movie DVDs, along with lending
support to the movie on demand business.

2. Star
The electronic items being sold at Amazon are in demand, making this business unit a
rising star for the company as the market share in this domain is also increasing with
time. The industry for electronic items is growing, creating vast opportunities for further
 growth of Amazon. Grisworld (2016) has asserted that the financial performance of
Amazon in consumer electronics category shows that it has achieved higher sales as
compared to brick and mortar retailers such as Best Buy. This trend is further expected
to increase due to increasing number of users of online shopping portals.

3. Question Marks
The segment of video on demand had some issues such as poor connectivity which has
limited the growth of this segment, making it a question mark. The business units of
Zappos has faced similar issues of low growth and return on investment after Amazon’s
acquisition of Zappos (Stone, 2009). For zappos and video on demand, the company will
need to address the issues which have resulted in low market share as it would help the
company to tap into the needs of the market and position these units as more
profitable, taking benefit of the growing industry. There is a possibility that the video on
demand and zappos may move out of the question mark category in future.

4. DOG
For Amazon mp3 has not been able to provide the company with any solid financial
gains, therefore it can be placed into the category of dogs. The mp3 business doesn’t
have a high market share and the industry is also growing at a slow pace.

PRODUCT/MARKET EXPANSION GRID

Amazon Ansoff Matrix is a marketing planning model that helps the e-commerce and cloud
computing company to determine its product and market strategy. Ansoff Matrix illustrates
four different strategy options available for businesses.  These are market penetration, product
development, market development and diversification.

1. Market penetration
Amazon uses market penetration strategy aggressively. Sophisticated user
experience features in general and recommendations feature on e-retailer’s website
in particular play an important role in the application of market penetration
strategy. Specifically, the e-commerce giant focuses on user experience
personalization thanks to efficient application of data science and machine learning
with positive implications on the volume of sales of existing products to existing
markets.

2. Product development
 Product development is one of the core strategies used by Amazon. Started by Jeff
Bezos selling only physical books online in 1997, today Amazon sells anything that
can be sold online. The largest internet retailer in the world by revenue sells more
than 500 million products, including products sold by third parties on Amazon
platform. Top product categories include clothing, shoes, jewellery, home and
kitchen appliances, books, electronic devices, sports and outdoor items and others.

3. Market development
Amazon is engaged in market development in a systematic manner. Started only in
the US, Amazon currently has country-specific sites in 13 countries, including
Canada, the United Kingdom, China and India. Moreover, Prime Free Same Day and
Prime Free One Day services are available in more than 8000 cities and towns. Prime
Now service is available in more than 100 cities in 9 countries.

4. Diversification
Amazon uses diversification to a certain extent. As a result of diversification strategy,
Amazon currently operates in media, hardware, advertising and other business
segments.

4. MARKETING STRATEGY AND MARKETING MIX

 Amazon Marketing strategy 2020

Amazon uses the high runner strategy to market its products. This strategy uses data to
uncover which products are in the highest demand in every category. Amazon’s pricing
algorithm then prices those products competitively and bids heavily on advertisements to pull
people to these products.

1. Market segment
As of January 2020, 81 percent of U.S. adults aged 18 to 34 years were Amazon
Prime members, representing an 11 percent jump from a 69 percent usage reach in
February 2020. During the global coronavirus pandemic, Amazon Prime adoption
increased across all age groups.

2. Target Market
Amazon (AMZN) is targeting a demographic that doesn’t have to struggle with a
mortgage or household bills, and are among the most digitally savvy consumers:
 America’s teenagers. The online retail giant is rolling out a new service for teenagers
that allows them to shop on Amazon with their own login.

3. Market positioning
Amazon’s Positioning Strategy was and continues to be Low-price, extraordinary
convenience, instant access, and comprehensive selection.

MARKETING MIX
The four Ps.
1. PRODUCT
Amazon is one of the leading ecommerce platforms in the world. Amazon sells all
its products online where the users login to Amazon through website or App and
place orders. These are then delivered to the consumers through its distribution
channels. Although Amazon started as an online book seller, it diversified its
product portfolio by leaps and bounds. Amazon has a huge offering in its product
portfolio in its marketing mix.

2. PRICE
As the different kinds of services are offered by Amazon its pricing strategies are
also varied. It uses technology to its advantage in setting the prices. Most of the
time the price of products is set following the competitive pricing strategy.
Amazon offers the lowest of prices and this is made possible by the efficiency of
its operations and also its web-based business model. It adjusts the prices
frequently based on the category of product, time of the day and
season. Amazon also follows differential pricing, for the same product it charges
different price depending in the place of consumer as it is having different
websites in each country it operates. 

3. PLACE
Amazon is a global brand and has its presence all across the world. All the
consumers buy products and services from the website and Apps of Amazon.com
to buy. Once a customer places the order the distribution channel of Amazon
comes into picture where the products are procured and stored at Amazon’s
fulfilment centres. These are huge warehouses constructed by Amazon in
strategic locations to reach even the remotest of places.

4. PROMOTION
 Amazon uses aggressive marketing campaigns to promote its brand. When it
comes to promotion Amazon leaves no stone unturned in its marketing mix
promotional strategy. Its major focus is on advertising – through print ads in
newspapers have increased exponentially of late. Amazon uses creative
television commercials and social media marketing through SEO and targeting
customers through their browsing patterns. Amazon also have affiliate programs
where website and blog owners advertise Amazon product links in their
platforms. Next important thing is sales promotion – Amazon has mastered this
art and give effective sales promotions and discounts during holiday seasons and
festivals resulting in high visits to the website.

MANAGING THE MARKETING EFFORT

1. MARKETING ANALYSIS
Swot Analysis
Strength

 As a global e-commerce giant, Amazon has a strong position and successful brand image
in the market.
 According to Interbrand’s Global Brand Ranking 2020, Amazon is ranked at #2 position
(Apple at #1 and Google at #3), with a brand value of $200 Billion.
 Amazon caters to a large number of customers for everyday needs at inexpensive
prices. This has made it a customer-oriented brand.
 Amazon frequently brings creative ideas and innovative additions to its product line and
service offerings like ambitious drone delivery service and Withings Aura Smart Sleep
System. This creates a differentiation from other companies.
 Amazon owns extensive product mix which attracts online customers to make their
majority of purchases from it rather than other online retailers. As of 2018, Amazon has
sold 562.3 million products in its Amazon.com Marketplace.
 With over $1 Trillion market capitalization and above $386 billion annual revenues,
Amazon is truly a market leader in online retail industry.
 Amazon is among the first companies in retail to raise its minimum hourly pay to $15. In
comparison, Target pays $12 per hour, Walmart pays $11 per hour,
and Costco pays $14 per hour. 

Weaknesses
  Easily imitable business model – Online retail businesses have become quite common in
this digital world. So imitating Amazon’s business model for rival firms is not so difficult.
A few businesses are even giving Amazon a tough time. These include Barnes & Noble,
eBay, Netflix, Hulu, and Oyster etc.
 Its Fire Phone’s launch in the US was a big failure while its Kindle fire device didn’t even
grow well.
 Tax avoidance in Japan, UK and US has sparked negative publicity for Amazon. President
Trump criticized Amazon over taxes on social media.
 Amazon owns very limited physical stores. This sometimes hinders to attract customers
buy things which are not sellable on online stores.
 As its offerings increase, it is becoming a challenge for Amazon to vet each product and
guarantee the highest level of safety. The U.S. Environmental Protection Agency (EPA)
recently had to order Amazon to remove a wide range of pesticides and unsafe products
on its platform.

Opportunity

 Amazon can gain the opportunity to penetrate or expand its operations in developing
markets.
 By expanding physical stores, Amazon can improve competitiveness against big box
retailers and engage customers with the brand.
 Amazon has the opportunity to improve technological measures and organizational
policies to reduce counterfeit sales. One case of counterfeit sales came into light when
Amazon sold a fake My Critter Catcher. The product was sold for $1 less than the
original product.
 Can do backward Integration by expanding its production of in-house brands such as
Amazon basics to differentiate its offerings and improve profit margins.

 More acquisitions of e-commerce companies can increase the company’s market share
and reduce the competition level.
 Self Driving Technology – Amazon recently acquired California-based self-driving startup
Zoox Inc for whooping $1 Billion. It can now leverage autonomous technology to exploit
the increase in demand for ride-hailing services or use it to improve its delivery network.

Threats

 Government regulations can also threaten the business proceedings of Amazon in some
critical countries. Amazon does not ship to Cuba, Iran, North Korea, Sudan, and Syria.
 Links to exploitative labor – Amazon is one of three retail giants facing scrutiny from the
US State Department for maintaining supply chains and labor sources associated with
human rights abuses. This exposes the ecommerce giant to reputational, economic, and
legal risks.
 Increasing cybercrime can affect the network security system of the company.
 Aggressive competition with big retail firms like Walmart and eBay can give Amazon a
tough time in the future.

2. MARKETING PLANNING

3. MARKETING IMPLEMENTATION

4. MARKETING CONTROL