Amazon Business Model

Company Background

Amazon is one of the largest e-commerce companies in the world. It is headquartered in Seattle, Washington, and it operates across the globe in 58 nations. Apart from its e-commerce retail business, the company has also established a strong foothold in other industries such as cloud computing services, streaming services, etc. The Amazon business model is designed to take advantage high economies of scale and globally distributed Amazon’s operations management. In this article, we have shed some light on the Amazon business model, which has enabled the company to become one of the biggest conglomerates.

New and Refurbished Products

Based on the Amazon business model, the company is a huge online retailer for both new as well as refurbished products. The organization operates in the business model with various moving parts. Firstly, Amazon sells products directly. A significant proportion of goods are usually presented to purchasers through their online shopfront with a smaller hike and inventory is reserved in the firm’s big network of storerooms. The majority of clienteles visit the organization’s location pretentious that their goods are usually less affluent and they are available readily for purchasing and delivery. Apart from direct sales, the organization provides an impressive platform for other retailers for selling their products to purchasers. These goods are usually sold through Amazon’s partner retailers which are often rarer common objects or those with an elevated procuring price, thus allowing the firm to circumvent acquiring of slow rate of moving inventory that can weak profit. Though Amazon does not charge any sorts of fee for their retailer partners to list items for sale, the firm usually retains a percentage of the sales value as the commission.

Flywheel Model

Jeff Bezos, CEO, and founder of Amazon follows a flywheel business model where the firm has the choice to translate their lower cost structure into greater profits and also providing some of the gains backs to their immediate shareholders through dividends. However, the firm passes it onto the customers through using sustained lower prices and reinvesting the rest of the surpluses into growth. A massive aspect of all these growth investments passes into their fulfillment along with the delivery network. This essentially helps in lowering their unit costs which amplify the subsequent components of the virtuous cycle. As a result of this model, the firm can turn on their inventory rapidly and they further have a cash-generating operating cycle. Amazon also spends a significant amount of money on their advertisements that constitute certain promotions, deals, and other forms of advertisements. This has enabled the company to create to face the strong threat from various Amazon competitors. Amazon states that their main aim is to enhance customer traffic to their website, creating awareness of their products and services, promoting repeat purchases, developing incremental goods and service revenue opportunities, and lastly firming and expanding their brand name.

Subsidiaries of Amazon Brand

According to the Amazon's operations management, the has established its brands with four categories: Amazon Basics, Amazon Fresh, Amazon Studios, and Amazon Warehouse Deals. Amazon Basics represents their electronic goods. Amazon Fresh sells as well as delivers groceries on exact time. Similarly, Amazon Studios is an online movie studio. Amazon Warehouse deals are a discounted warehouse on refurbished products. In the past couple of years, Amazon has purchased nearly 30 companies. The most recent purchase is Comixology which intends to generate a well-designed application for purchasing comic books from more than 75 publishers. This usually makes it easier to observe new comics which are sold at the same price as those that are in the store. Amazon has a partnership with different sorts of companies for offering their e-commerce services for making other organizations better in the online businesses.

The SWOT analysis Amazon suggests that a big share of Amazon’s sales derives from Northern America. Globally, the firm’s sales have boosted from $65.86B in 2018 to $74.72B in 2019. This is mainly because Amazon Prime became a massive success in major Asian in addition to the European markets. Additionally, 12.5% income of $35.03B was generated in 2019 from Amazon Web Services which is a subsidiary for generating big customers on-demand cloud services. In the year 2017, the firm concentrated on over 90 services of cloud computing along with the devices of the Internet of Things (IoT). There were some big shots which comprise Netflix, General electronics, Unilever, NASA which use AWS of the firm for better web services.

Investment in Research and Development

Amazon has huge market capitalization. The reason for the firm’s huge market capitalization is its prior investment. Investors usually undertake a greater interest in the company and they bet a huge amount of money as they have believed that the firm can grow faster, longer as well as bigger than the majority of other firms. Investors also perceive that Amazon is the most profitable firm than any other mainly in the USA. The business approach of Amazon constitutes of emphasizing on know-hows, augmenting logistics applications, refining its web services through fulfilling capacity, Merger and Acquisitions strategy, Research and Development activities in their supply chain management, testing with Fintech, and also safeguarding with their discoveries in using patents.

Amazon business model states that the company has been investing significant amounts of money in robotic and drone technologies in the past couple of years. In its warehouses, there are more than 45000 robots that have different functions and operations. In the year 2012, Amazon acquired Kiva systems which is a company that usually designs robots for picking as well as packing the process for nearly $775M. Apart from acquisitions, the firm also systematizes challenges in various institutions and universities all over the world where they offer a large proportion of money for discovering the next-generation robots. Amazon business model also suggests that the company is using investing for their research in drone transport. In the UK, the firm has initiated its drone delivery facility using their Amazon Prime Air.

Further, in 2017, the US administration has accepted the drone distribution program. At the current time, Amazon has filed different drone patents in terms of packaging delivery, package parachute as well as floating airship warehouses. Additionally, the firm has patents on its drone design in terms of effective maneuvering, secure landing, and long flights. At an advanced level, Amazon has also got a patent to charge electric vehicles through their drones. This depicts that the organization has a prior awareness in electronic vehicles as in the future there is a necessity to introduce different methods to charge EV. Amazon has also acquired self-driving autonomous vehicle company Zoox to have streamlined supply chain management in the future.

AI in Amazon

Artificial Intelligence is usually considered as one of the tough areas where despite possessing many participants, Amazon got an immense inducement. The firm is constantly emphasizing AI as well as machine learning language to improve its customer experience. The segment AWS as well as its undertaking Alexa Internet is usually the main part of the firm’s speculation in AI. In 2017, the firm has proclaimed its novel research center in Germany which will completely focus on developing and prioritizing AI. In the same year, Amazon has collaborated with Microsoft for rolling out innovative instruments that can make it simpler for developers for using open-source AI software. Partnership with Microsoft ensured collaborating research on AI with their assistants Alexa as well as Cortana that communicates with one another and offer effective services to the users.

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