CASE STUDY

AMAZON SOURCES OF COMPETITIVE ADVANTAGE

"Amazon.com strives to be the e-commerce destination where consumers can find and discover
anything they want to buy online."

– Jeff Bezos, Founder of Amazon.com

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. In July 1994, Jeff Bezos filed the
paperwork to launch a company he called Cadabra, Inc., a shortened version of the famous
magician’s expression, “abracadabra,” according to the Seattle Times. That name didn’t last
long, though, because Bezos’ first lawyer, Todd Tarbert, informed Bezos that over the phone,
“Cadabra” was often misheard as “Cadaver,” Brad Stone writes in “The Everything Store: Jeff
Bezos and the Age of Amazon.” A second option Bezos considered was Relentless. The
Relentless.com URL still takes you to Amazon today. But Bezos’ friends told him the name
sounded “a bit sinister,” Stone writes. In October 1994, Bezos searched through the “A”
section of the dictionary looking for company names, reasoning that would help his company
come up first in alphabetical searches. That’s when he found the name “Amazon,” and
marched into his Seattle garage where the company was launched and told employees he
had picked a new name for the company. “This is not only the largest river in the world, it’s
many times larger than the next biggest river. It blows all other rivers away,” Bezos said,
according to Stone.

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.
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Have a vision, and organize your time 2 to 3 years out

“Vision is absolutely important, but it doesn’t deserve your day-to-day attention,” Bezos said
at the Yale Club in New York City in February, according to a transcript from Business Insider.
You need a vision, of course, Bezos said, “but mostly your time should be spent on things
that are happening today, this year, maybe in the next two or three years.” For example, at
Amazon, quarterly financial results are determined by work put in years ago. “We’ll
announce our Amazon quarterly results, and [people will say], ‘Great quarter,
congratulations!’ And then I say, ‘Thank you,’” Bezos said at the Yale Club. “But what I really
think about is [how] that quarter was kind of baked and done two or three years ago, and
right now the senior executives at Amazon are working on a quarter that’s going to happen
in 2021, 2022 — that kind of thing.”

Get used to naysayers

No matter how successful you may become, you will not be immune to criticism. “We would
be very naïve to believe that we’re not going to be criticized. That’s just part of the terrain.
You have to accept that,” Bezos said in an interview with Axel Springer CEO Mathias
Döpfner, published by Business Insider in 2018. “One thing that I tell people is ... if you’re
going to do anything new or innovative, you have to be willing to be misunderstood. If you
cannot afford to be misunderstood, then for goodness’ sake, don’t do anything new or
innovative.” Bezos faced resistance when he first thought to leave his Wall Street job and
start Amazon. He was a senior vice president at the hedge fund D.E. Shaw before he’d
turned 30 years old, and he had “a brilliant boss that I much admired,” he said in the
commencement speech he delivered at Princeton in 2010. Bezos explained to his boss that
he wanted to sell books online.“He took me on a long walk in Central Park, listened carefully
to me, and finally said, ‘That sounds like a really good idea, but it would be an even better
idea for someone who didn’t already have a good job,’” Bezos recalled.Although the advice
was sound, Bezos was, in the end, proud of his decision to take the risk.“That logic made
some sense to me, and he convinced me to think about it for 48 hours before making a final
decision. Seen in that light, it really was a difficult choice, but ultimately, I decided I had to
give it a shot,” Bezos said in his commencement speech. “I didn’t think I’d regret trying and
failing. And I suspected I would always be haunted by a decision to not try at all. After much
consideration, I took the less safe path to follow my passion, and I’m proud of that choice.”

Take time to be inefficient:

Being efficient is part of Amazon’s DNA. But Bezos also places great importance on time
spent being inefficient, especially when that means wandering off the beaten path to explore
your curiosity.“From very early on in Amazon’s life, we knew we wanted to create a culture
of builders — people who are curious, explorers. They like to invent,” Bezos said in
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his annual letter to sha reholders published in April.“They see the way we do things as just
the way we do things now. A builder’s mentality helps us approach big, hard-to-solve
opportunities with a humble conviction that success can come through iteration: invent,
launch, reinvent, relaunch, start over, rinse, repeat, again and again. They know the path to
success is anything but straight.” It’s the inefficient time that often results in discovering the
next big thing. “Sometimes (often actually) in business, you do know where you’re going,
and when you do, you can be efficient. Put in place a plan and execute,” Bezos said.“In
contrast, wandering in business is not efficient … but it’s also not random. It’s guided — by
hunch, gut, intuition, curiosity, and powered by a deep conviction that the prize for
customers is big enough that it’s worth being a little messy and tangential to find our way
there. “Wandering is an essential counter-balance to efficiency,” he said. “You need to
employ both. The outsized discoveries — the ‘non-linear’ ones — are highly likely to require
wandering.”

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.
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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.

Amazon's competitive advantage

It is all about the successful process of building a bridge between strategy and
implementation. Therefore, Porter (1980) identified five forces driving industry competition
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and thereby five perspectives to understand the various parameters that can influence the
success of a business and the intensity of rivalry in its environment.

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/