Amazon Sources of Competitive Advantage

Author- | Posted- | Updated: October 8, 2018 |

Amazon Sources of Competitive Advantage

Amazon is one of the most shining innovation stories of twentieth century. It was founded by Jeff Bezos in 1994 and is headquartered in Seattle. The brand grew to be a highly trusted e-retail brand in quite a short span of time growing from an online book seller to e-retailer selling millions of items. It is one of the leading technology brands that are known for their financial clout and global presence. In 2017, it ranked on 6th position in the Forbes world’s most valuable brands’ list. Apart from a large collection of products, Amazon is known for having created very high level of customer convenience. ‘Amazon web services’ serves developers and enterprises of various sizes. Its market capital as of May, 2017 stood at $427 billion dollars. This is a discussion of the sources of competitive advantage that have helped Amazon build and expand its brand.

Brand image:

Brand image is a crucial factor and a critical strength that helps brands grow their influence and find a leadership status in the industry. It is also a critical strength in terms of acquiring new customers as well as retaining the old ones. Amazon is a brand built on trust and it is the most important reason the brand grew so fast. Even now when it says millions of products to millions of buyers worldwide it ensures that it sells only good quality products. To maintain its customers’ trust, the brand has also established a review system where the customers can review and comment upon a product and seller. Another important strength of the brand is its extraordinary customer service in which regard it is hailed as one of the best. It continually focused on remaining customer centric and in this regard Jeff Bezos is considered not any less obsessed than Steve Jobs himself. Several stories are famous in the media with regard to Jeff Bezos and Amazon’s extraordinary focus on customer service. These things have helped continuously strengthen its brand image and grow its influence worldwide. Today, it is the number one brand in e-retail and the number one challenger for established retail brands like Walmart.

Technology:

Technology is another critical strength in the world of e-retail that has helped Amazon manage a higher degree of customer convenience. The brand continuously invests in modern and digital technology to up the level of customer experience. Technologies like AI have helped it better serve its customers. It has also patented several technologies. In this era digital technology is one of the most important requirements for growth of a brand. Without investing in technology, it is impossible to give your customers the best experience and service.  Its ‘Amazon Web Services’ serves developers and businesses of various sizes. Moreover, Amazon has remained engaged in the practical application of machine learning for quite some years. From the use of Prime autonomous air delivery drones to the use of machine vision at the Amazon go convenience store for eliminating checkout lines and Alexa its cloud based AI assistant, the brand is quite innovative in terms of use of technology for improved customer convenience.

Customer base:

A large customer base is a major strength and especially so for brands like Amazon that are heavily focused on customer retention. Its number of active users has continued to grow over the years. In these years its number of active users worldwide has grown by several millions. In the first quarter of 2016, its number of users was past 310 million. Moreover, it has used several loyalty and benefits programs like Prime membership to provide additional benefits to its customers which works to retain them for a long term.

Financial strength:

The revenue of Amazon has continued to grow from 2014 to 2016. From 88.9 Billion dollars in 2014, it has grown to 135.9 billion dollars in 2016. Financial strength becomes a major advantage due to several reasons. It allows the brand to make investments in several areas including technology and HR and grow faster. Apart from that financial strength also helps with introduction of new products and grow new sales and distribution channels. Amazon also makes Kindle E-readers, Fire tablets, Fire televisions, Echo as well as produces media content.

International presence:

International presence of the brand is also an important strength of the brand. Due to growing overseas demand the brand has introduced several regional marketplaces to serve the customers in North America, Europe, Japan, China and Asia. This is also a major strength that shows the competitiveness of the brand and its growing international clout. The nearest competitors of Amazon are Ebay, Alibaba and Flipkart.

Leadership and strategy:

Leadership and strategy have also become important strengths of the brand. Most of the brands in 21st century have grown because of their excellent leadership and strategies. Jeff Bezos has proved an excellent leader and his vision has brought Amazon among the top ten most valuable brands of the world (Forbes list).

Supply and distribution chain:

Amazon also has one of the largest supply and distribution channels. Several million throd party sellers sell from its website and items are shipped to several nations through an international distribution network. It has opened several fulfilment centres worldwide and this large fulfilment network aids the shipment of items bought by customers. Moreover, it is opening new ones in the fast growing Asian markets. A well managed distribution and supplier network is major source of competitive advantage and serves as the backbone of a business.

Conclusion:

Amazon’s business empire has grown very fast in very few years. The growth of the brand rests on its several important strengths. Apart from high level technology, its brand image and large customer base are also important strengths that provide it with sustainable competitive advantage. Moreover, the brand has continued to invest in making its own products. The popularity of its Kindle and Echo is also an important source of competitive advantage. The brand is no 1 e-retailer of the world and its leadership position apart from everything is due to leadership and strategy.

Sources:

https://www.forbes.com/companies/amazon/

https://www.statista.com/statistics/476196/number-of-active-amazon-customer-accounts-quarter/

Amazon Annual Report

https://services.amazon.com/global-selling/global-selling-guide.html

Abhijeet Pratap

Abhijeet has been blogging on educational topics and business research since 2016. He graduated with a Hons. in English literature from BRABU and an MBA from the Asia-Pacific Institute of Management, New Delhi. He likes to blog and share his knowledge and research in business management, marketing, literature and other areas with his readers.