REPORT

OF

FALL 2021

SUBMITTED TO : RAWKAT NUR

SUBMITTED BY-

NAME: MOHAMMAD FARHANUDDIN

ID NO : 202-0012-001

DEPARTMENT: SCHOOL OF BUSINESS

COURSE : MARKETING MANAGEMENT

CODE: MKT 329

Amazon Value Chain Analysis

1. Introduction

Value chain analysis is a framework that helps identify the business

activities in a company's value chain to highlight the opportunities for
improvement. It also supports evaluating each of the activities in a
company's value chain to understand where opportunities for improvement
lie. This is so important that a large part of giant Amazon's success is
attributed to the design and implementation of Amazon value chain analysis.

Let us consider the example of Amazon value chain analysis to understand

the concept. Amazon value chain analysis there are two types of activities,
namely primary and support activities. Primary activities may include
inbound and outbound logistics, marketing and sales, operation, and
services. At the same time, the support activities include HR, infrastructure,
technology, and procurement.

2. Background of Amazon

Amazon.com started as an online retailer of books but gradually transformed

into an online store selling virtually everything on the earth. Amazon also
sells web services, cloud storage, cloud computing and Kindle, which is an
electronic book reader. Amazon has its headquarters in Seattle, Washington.

Amazon.com’s initial strategy was based on the fact that it will not carry any
inventory. However, it started holding inventory in 1997 to gain more control
over deliveries. As it grew, Amazon started allowing small companies and
individuals to conduct selling through Amazon and then transformed into
iconic Fulfillment by Amazon service.

Company Name Amazon.com

Founders Jeff Bezos
Founded in 1994
Present CEO Andy Jassy
Headquartered at Seattle, Washington
Operates in 20 countries
Revenue $386.1 billion
Operating Income $7.702 billion
Number of employees 1,298,000 (approximately)

Coming back to the value chain analysis of Amazon, let us analyze the

complete framework by going through the Primary and support activities.

Evaluation of Current Strategy

Amazon’s generic corporate strategy can be described as concentric

diversification. This strategy is based on leveraging technological
capabilities for business success and following a cost leadership
strategy aimed at offering the maximum value for its customers at the
lowest price in addition to wrapping its business around the customers
wherein they find Amazon to be the go-to portal for their online
shopping needs.

Indeed, this strategy has paid off well as can be seen from the fact
that it is the world’s largest online retailer and has consistently been
the leader in the market segments in which it operates. Having said
that, it must also be noted that cost leadership can follow the law of
diminishing returns wherein firms following this strategy find that they
are unable to sustain growth or increase profitability once the “low-
hanging fruit” are plucked.

Continuing the discussion, the generic business strategy followed by

Amazon can be explained using The Ansoff matrix as represented
pictorially in the figure above. Amazon is placed in the Overall Cost
Leadership quadrant and its relentless focus on costs is the key to
understanding its overall strategy.

The specific measures taken by Amazon in pursuit of this strategy

include steep discounts for is regular members through the Amazon
Prime program, ensuring timely and even express delivery and at
times, waiving off the shipping charges, passing on the benefits of
avoiding state taxes to the customers thereby lowering the price even
further, and an overall strategy based on making the customer
experience as seamless and as smooth as possible.

Apart from this, Amazon’s strategy is driven by its sources of

competitive advantage wherein it is focus on technology, actualizing
the benefits of economies of scale, and leveraging the efficiencies
from the synergies between its external drivers and internal resources
have been the cornerstones of its business model. Further, Amazon
uses Big Data Analytics as a tool to map consumer behavior. Indeed,
Big Data has been embraced to such an extent by the company that it
is now in a position to market this as another service offering.

3. Primary Activities in Amazon Value Chain Analysis

Important: The goal of the primary activities is to create value in the

business that exceeds the cost of operation, which results in higher
profit.

In Amazon value chain, primary activities are the activities that make the basis of the
business model through providing the required services to the customers. These
activities are procurement of raw materials and products, operations to convert the
procured materials to final products, and then high-quality services, sales, and marketing
to gain a competitive advantage. The five primary activities are discussed below in
detail.
Source:  EdrawMax Online

Inbound Logistics:

Inbound logistics generally mean obtaining raw materials. However, since Amazon
usually does not produce its products, Fulfilment by Amazon service is its inbound
logistics, and it provides these services to vendors. Amazon stands tall in the market
because of its logistics and the efficiency of its delivery and returns. It provides
guaranteed services with responsibility for logistics, customer service, and product
returns. At the same time, efficient logistics infrastructure covers the inbound logistics
for Amazon value chain analysis.

Operations:

In general value chain analysis, operations include activities that convert raw materials
into finished goods. Amazon has different channels that are covered by the operations.
These segments are of different geographical locations, including the North American
segment and international segment. The third segment is the Amazon Web
Services(AWS). AWS encompasses computing, storage, cloud infrastructure, database,
and other services. These operations provide Amazon a competitive advantage through
services and operations.

Innovative and robust solutions add value to Amazon's profile. Cloud storage, AWS, and
cloud computing started as in-house solutions for the company itself. However, its
sophistication and robustness made it another business stream for Amazon as they
commercialized these solutions. So, the operations also provide a competitive advantage
to the company.

Outbound Logistics:

Outbound logistics involve storage, supply, and distribution of the finished products.
Amazon's outbound logistics revolve around the 175 fulfillment centers all around the
world. Amazon's fulfillment is supported by robotic technology for inventory. Activities
involved in storing, moving, and distributing finished products. Amazon has various
operations included in its outbound logistics. Fulfillment by Amazon manages, stores, and
ships the products in all orders. It includes the shipping companies and Amazon's logistic
system encompassing planes, ships, trucks, and drones for efficient outbound logistics.

Apart from this, outbound logistics also involves the digital delivery of its products. It
includes digital format books, media, etc. Then another channel of outbound logistics for
the physical stores.

Marketing and Sales:

Of course, this great scale of marketing and advertising is spanned over different
channels, media, and a global reach and impact. It includes print and media ad
campaigns, sales promotions, events, public relations, and targeted customer marketing.

Apart from direct and mainstream marketing, Amazon has other channels of attracting
customers to its brand. It uses attractive prices, fast delivery, and Amazon prime
services for marketing itself as a favorite brand.

Service:

Value chain analysis of Amazon shows that the services provided by the organization
play a vital role in acquiring a competitive advantage. It provides premium services for
the end customers and the vendors that eventually result in a sleek and reliable business
model for everyone. It provides full support, including training, literature, and support
facilities for vendors. At the same time, the end customer can use Amazon Marketplace
and prime services for more advantages. After-sale service is another great endeavor
from Amazon.
Source:  unsplash.com

4. Support Activities in Amazon Value Chain Analysis

Important: Secondary activities or support activities consist of infrastructure, human

resources management, and procurement.

The support activities provide a support framework for primary activities to work properly
and efficiently.

Infrastructure

Amazon is giant in the business field, and no doubt, it couldn't bear its weight without a
firm infrastructure to carry the weight. Amazon has invested finances, time, and efforts
to build a scalable and reliable business model to provide its huge size and market share.
It includes offline structures like shipping, hiring, and delivery. At the same time, the
online support and digital solutions are nothing less than the best.

Besides its backend management, the company also has a seamless customer service
and employee management infrastructure.
Human Resource Management

Amazon’s value chain analysis cannot be completed without its HR management

department. Amazon has its in-house employees, international employees, contractors,
and temporary workforce. Amazon has a firm infrastructure supported by technology to
ensure maximum cooperation between the firm and the workforce. Its rewards program
and the recognition of good work have gained loyal employees and the least turnover.

Technology Development

Amazon has not only proved its success in physical merchandise but has also not left the
digital front unattended. The processes and solutions like cloud computing and cloud
storage that started as the company's processes to deal with its operations worked so
well that they have become industry standards.

Procurement

The sales and Operations (S&OP) process deals with the procurement for the company.
The inventory is managed through this system using forecasting and just time inventory
principles.
Amazon’s Core Business Processes
Amazon.com Inc. (AMZN), the world’s largest online retailer, has grown
rapidly in a broad range of businesses including its core e-commerce
operations, cloud services, and digital advertising. It also sells products
such as the Alexa personal assistant and ecosystem, Kindle e-reader, Fire
TV, and movies and television shows through its Amazon Prime Video
platform.1
Amazon's rivals include Walmart Inc. (WMT) and Alibaba Group Holding Ltd.
(BABA).

Amazon's Financials
Amazon ranks as one of the world's top companies by market value.
As of Oct. 1, 2021, Amazon had a market cap of $1.7 trillion. 2

The company posted net income of $7.8 billion during Q2 of its 2021
fiscal year (FY), the three-month period ended June 30, 2021. Net
income rose 48.4% compared to the year-ago quarter. Revenue, which
Amazon calls net sales, rose 27.2% to $113.1 billion for the quarter.
Profits were fueled by robust revenue growth, but received an
additional boost from a significant increase in other
income. Operating income grew 31.8% to $7.7 billion. 3

Amazon's Business Segments

Amazon divides its business into three segments: North America,
International, and AWS. The first two of these segments, North
America and International, refer to geographical breakdowns of
Amazon's retail business. They generate revenue from retail sales in
North America and the rest of the world, as well as from subscriptions
and export sales for those areas. 4

Retail can further be broken down into online stores, comprising the
bulk of sales, and physical stores. Company-wide, online stores
accounted for $53.2 billion in sales in Q2 FY 2021, or about 47% of net
sales, while physical stores generated $4.2 billion in sales, or about
4% of net sales. 5
North America
Amazon's North America segment dominates its net sales, accounting
for $67.6 billion in Q2 FY 2021. That is an increase of 21.9% from the
year-ago quarter and it comprises about 60% of the company's net
sales for the quarter. Operating income for the North America
segment during the quarter was $3.1 billion, comprising about 41% of
the total operating income for all segments. Operating income for the
segment rose 47.0%. 5

Aside from retail, the other primary source of revenue for North
America is subscriptions, including Amazon Prime, which offers
unlimited free shipping, and unlimited streaming of movies, TV shows,
and more. 6

International
Amazon's International segment consists of Amazon's retail business
for consumer products and subscriptions for internationally-focused
online stores. It also includes export sales from those stores, but not
those from North America-focused online stores. 6

The segment reported operating income of $362 million in Q2 FY 2021,

up 4.9% compared to the year-ago quarter. It accounts for about 5% of
the operating income for all segments. Net sales for the International
segment grew 35.5% to $30.7 billion, comprising about 27% of total
net sales.

Amazon's Recent Developments

On Sept. 14, 2021, Amazon announced that it was planning to hire
125,000 fulfillment and transportation workers across the U.S. in
addition to the 40,000 corporate and technology jobs it announced
earlier in the month. The company noted that it has opened 250 new
fulfillment centers, sortation centers, regional air hubs, and delivery
stations in the U.S. in 2021.
9

On Aug. 10, Amazon announced it would pay customers who suffer

injury or property damage due to defective goods sold on the
company's U.S. platform. This shift in policy aims to stem a growing
number of lawsuits against Amazon over the company's potential
liability for bad products sold by independent merchants on its site.
As of Sep. 1, Amazon will pay valid claims up to $1,000 at no cost to
sellers. More than 80% of injury and damage cases on the Amazon
platform are within that range. 10

How Amazon Reports Diversity and Inclusiveness

As part of our effort to improve the awareness of the importance of
diversity in companies, we offer investors a glimpse into the
transparency of Amazon and its commitment to diversity,
inclusiveness, and social responsibility. We examined the data
Amazon releases to show you how it reports the diversity of its board
and workforce to help readers make educated purchasing and
investing decisions.

Below is a table of potential diversity measurements. It shows

whether Amazon discloses its data about the diversity of its board of
directors, C-Suite, general management, and employees overall, as is
marked with a ✔. It also shows whether Amazon breaks down those
reports to reveal the diversity of itself by race, gender, ability, veteran
status, and LGBTQ+ identity.

Amazon Diversity & Inclusiveness Reporting

Veteran Sexual
  Race Gender Ability Status Orientation

Board of Directors          

C-Suite          

General ✔ (U.S.
✔      
Management Only)

✔(U.S.
Employees ✔      
Only)
Who Are Amazon's (AMZN) Main
Competitors?
Amazon (AMZN) competes head-to-head for market share with some of the
largest corporations in the world. While Amazon started out as an online
retailer of books, it has grown over the decades to become the largest e-
commerce company by revenue in the United States.

eBay
In the e-commerce segment Ebay is the top competitor of Amazon. eBay Inc.
is an e-commerce marketplace founded in 1995 by Pierre Omidyar
headquartered in San Jose, California. The company website engages both
business-to-business and business-to-consumer sales. After its humble
beginning, eBay turned into a household name.

It is “the online marketplace” where individuals and businesses buy and sell
variety of goods. Buyers can freely use website but sellers are charged fee
for their items sold after providing limited free listings. Countless
transactions go through eBay website on daily basis. After Amazon, eBay is
the second largest e-commerce company in the United States in sales share
at 6.1%.

Walmart
Walmart is one of the fastest growing ecommerce retailer in 2019. This retail
giant surpassed Apple to become the third largest e-commerce retailer.
Walmart e-commerce sales up 43% in Q4 of 2018 in the US market. This was
made possible due to growing online grocery, delivery business and huge
collection of assortments on Walmart.com. Walmart has become the
strongest competitor of Amazon, Instacart and many other grocery
businesses. Wal-mart.com is working with several partners to offer grocery
delivery to customers door step at more affordable prices.
Home Depot
Home depot is an American home improvement retailer that sells tools,
construction products and services. It has 2290 stores located in United
Stated, Canada and Mexico and these stores are the hub of its business. In
the year 2018 the company generated 108.2 billion which increased by $7.3
billion as compared last year. The Home Depot online generated 7.9% of net
sales which was 6.7% of net sale in 2017. The company online sales grew
26.2% in 2018.  
Etsy
Etsy also etsy.com is an online marketplace that focuses on craft and
vintage items under the categories of jewelry, home decor, furniture,
clothing, bags and many more. It provides a storefront to sellers where they
can offer their listings for a certain fee per item.

Best Buy
Best Buy Co. is an American Consumer Electronics Retail Company operates
in United States, Canada and Mexico and headquartered in Richfield
Minnesota.

According to forbes.com the company e-commerce sales is around 14% of

the total revenue. The company is focusing on e-commerce growth to remain
competitive in the Amazon dominated ecommerce marketplace. This
consumer electronic company is working hard to cut costs, stabilize its
revenue stream and increase its online sales. Best Buy made huge
investments in the online platform and shown improvements in the online
sales. The company is also looking forward to build digital capabilities that
can increase customer shopping experience on digital devices.

Costco
Costco Wholesale Corporation also known as Costco is a multinational
corporation founded in 1976 by James Sinegal and Jeffrey Brotaman. Costco
has many success stores, in 2015 it was the second largest retailer in the
world after the retail giant Walmart. Costco ecommerce sales for the last
quarter surged by 25.5%. Loyalty reward programs is the key factor of online
sales growth. According to Costco CFO, the company is planning to expand
its ecommerce operation in Australia and Japan. Costco need to improve its
digital capabilities to better compete with Amazon and other ecommerce
businesses
AMAZON BUSINESS DIMENTATION & MODEL

Amazon Business provides its users a purchasing solution for their registered business of
any size. Each business can assign users who are allowed to go in and purchase business
supplies on Amazon on behalf of their employers. The main administrator can add
authorized users or remove them as needed, and manage payment methods, shipping
addresses, approval workflows, reporting options and more, based on the needs of the
business.

Price savings and shipping options

Amazon Business offers exclusive price savings and shipping benefits for its registered
business members. Anyone with a business account can purchase via Amazon.com.
Account holders receive price breaks on multi-unit purchases, general price cuts on
millions of business products, and the opportunity to compare prices from multiple
sellers. You can even request quantity discounts from some sellers.

Payment options

You or another administrator of your Amazon Business account can add individual or
shared payment options. Shared payment methods include credit cards, debit cards and
the Amazon corporate credit line. Any authorized user of your business account can use
the payment method of choice to purchase items on your business's behalf. While all your
authorized account users can use the card you register, to increase security, they will
only be able to see the last four digits.

The Amazon corporate credit line expands your user and management options, giving you
the ability to authorize multiple buyers on a single account, download order history
reports and pay by purchase order, according to Rohde. It also has easy-to-understand
statements and no annual fee. Account administrators can manage individual and shared
payment methods and shipping addresses to make ordering seamless for all purchasers
in your company.

What customers say

Having touted its "tailored business experience," has Amazon come through on the
promise of Amazon Business? Its growing numbers of customers certainly think so.
"We have our Amazon Business account to mainly take advantage the Amazon Tax
Exemption Program," said Rob Boirun, CEO at Reviewster Network. "So, in addition to
getting tax-free purchases, we love the program's ease of use in ordering and reordering
our most common items. When we run out of printer toner or other office supplies, we
can easily order within a few seconds, and the items are in the office two days later."

Boirun said his company has also used Amazon Business for larger purchases, leveraging
payment options where the firm can split up the payments between different people in
the company. "For example, we purchased a new Wi-Fi router and were able to split up
the bill so that four different people using it would each pay 25%."

Amazon Business helps some companies more than others in certain areas, and company
decision-makers should know those caveats before signing on with the program.

"Amazon Business works the best when you have products that can be purchased in bulk
for businesses," said Chad Rubin, an e-commerce business owner and a Top 50 Amazon
seller. "That's a big benefit, as you can incorporate bulk pricing to boost sales and
provide a discount to businesses who need a larger amount of your product."

Rubin pointed out that when Amazon Business customers use bulk pricing, they can
reach a new audience that tends to spend more, such as other businesses. "It definitely
helps when you use bulk pricing to attract customers who need more of certain
products."

What is Amazon Business Prime?

Amazon Business Prime is an Amazon subscription that provides a few benefits to

subscribers. A subscription includes access to free delivery, discounts and member-only
offers. Amazon Busines Prime also includes spending reports powered by AWS
QuickSight. Spend visibility provides graphic-driven reports to help manage your
business's Amazon-related expenses.

Additionally, Business Prime members have access to guided buying for employees.
Guided buying allows administrators on the account to set preferred suppliers and
products and restrict employee capabilities when it comes to placing orders. Business
Prime members also receive extended terms for Pay-By-Invoice, extending their payment
terms to 45 or 60 days depending on their plan. 

Amazon offers free two-day shipping in the continental U.S. for Business Prime products,
and same-day delivery is available in eligible ZIP codes and select cities. Same-day
delivery is available seven days a week most days of the year, with limited availability on
certain holidays and high-volume shopping days including Black Friday and Prime Day.
Your order must be at least $35 with the free same-day icon to qualify for same-day
shipping.
Business Prime customers can also use Amazon Day for free to select a single day each
week to receive all their weekly items, preventing excessive package deliveries. Eligible
items can be ordered up to two days before your business's selected Amazon Day.

What does Amazon Business Prime cost?

Amazon Business Prime has several membership plans to accomodate various numbers

of users. These include:

 Duo: The Duo plan is $69 per year and accomodates one user. It does not include
access to spend visibility, guided buying, or extended terms for Pay By Invoice,
however.
 Essentials: The Essentials plan is $179 per year and includes up to three users. It
does make available the spend visibility, guided buying and extended terms for
Pay By Invoice that are not available with the Duo plan. 
 Small: The small plan is $499 per year and includes up to 10 users. 
 Medium: The medium plan is $1,299 per year and includes up to 100 users. 
 Enterprise: The Enterprise plan is $10,099 per year and includes more than 100
users. It also includes an optimal deployment, in which Amazon Business
Professional Services fine tunes the account to optimize spend visibility and policy
settings in a full scale implementation process.

Is Amazon Business Prime a good deal?

Many businesses find value in the subscription, but it's not always the cheapest way to
shop. The value of free shipping on selected items from Amazon is impacted largely by
local prices and availability, bulk prices for business shoppers, and order scheduling. For
example, if you own a restaurant and typically order from Restaurant Depot a few times a
year, you should do a price comparison; you may already be getting the best deal
possible. On the other hand, if you live in a remote area where little in-store shopping is
available or delivery costs are often very high, Prime may be worth it.
 AMAZON MARKETING PLAN CONTENTS
What are Amazon's marketing tactics?

 Search engine optimization (SEO) ...

 Video marketing. ...
 Web design. ...
 Conversion rate optimization (CRO) ...
 User-generated content. ...
 User data. ...
 PPC advertising. ...
 User-generated content.

To help you be successful on Amazon, let’s take a look at some of the top Amazon
marketing strategies for 2021.

1. Optimized Amazon SEO

Optimizing your products for Amazon SEO will help your customers find them when
they search for relevant search terms. Amazon’s search engine gives priority to well-
described product searches and pins them to the top of the recommended searches.
Here’s what you should be paying attention to.

Keywords

When it comes to keywords, Amazon allows you to add 250 characters on the
backend to influence product discoverability. These are invisible to the customer
and allow you to associate your product with certain keywords and phrases. Make
sure you do your keyword research to be able to compete within this ecommerce
giant!

Titles

Put yourself in the customer’s shoes when creating a title. By including relevant
keywords, you can increase your clickthrough rate and boost sales.

Descriptions

Your descriptions set you apart from the competition. Use bullet points to outline
your product’s important features and increase conversions.
Images

When it comes to images, Amazon has very clear guidelines. Product images should
be clear, easy to understand, information-rich, and attractive.

Q&A
Your customers want information. By adding a Q&A section, you can answer
commonly asked questions and keep your customers informed.

2. 2. Affiliate marketing
Amazon offers an Amazon affiliate program that allows website owners to advertise
products from Amazon on their websites. When people click on these links and buy a
product, they earn a commission.

This is a useful Amazon marketing strategy because it directs new traffic to your
Amazon page. Featuring your products on different websites can get you a
completely new set of customers you wouldn’t get otherwise.

3. Amazon advertising
Amazon advertising puts your product in front of users who might not have found it
on their own. There are three kinds of Amazon advertisements.

Product display ads

Product display ads are Amazon PPC (pay-per-click) ads and they’re insanely popular.
They appear virtually everywhere and have a relatively high conversion rate of
roughly 10%.

Sponsored brand ads

Sponsored brand ads feature a headline, logo, and up to three of your products. They
can be found on the search page and help drive brand awareness.

Display ads
Amazon display ads are CPC (cost-per-click) ads that can be displayed not only on
the Amazon website and app but also on websites and apps that aren’t owned by
Amazon. You can customize these ads to take users to your Amazon store, product
page, or even a custom optimized landing page.
4. Third-party advertising
You may be selling on Amazon, but this doesn’t mean your advertising is limited to
the platform. Third-party advertising can help increase clickthrough and conversion
rates. Make sure to always optimize your ads by utilizing data. Automated data
reporting helps with that tremendously. 

Google Ads
Google receives over 63,000 searches per second, making it a valuable marketing
channel. Google ads for ecommerce are a significant part of overall ads run on
Google. With Google Ads, you can take advantage of features like retargeting and
email marketing.

Facebook ads
Facebook is a major player in social media. Utilizing Facebook’s paid ads platform,
you can push a completely new audience of customers to your Amazon store and
products.

5. Customer reviews
One of the most popular features of Amazon is its review system. Once a potential
buyer reads the product description, the next thing they will do is verify if the
product is of high-quality according to the top product reviews. Focusing on getting
positive reviews can help boost your product’s popularity organically. Offering
incentives like temporarily lowering your prices or sending out free products can
encourage customers to leave good reviews.