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Amazon Case Study

  1. a. Discuss the form of Innovation Amazon.com represents (e.g. Product, Process or Service). Justify your answer.

The formation of the Amazon was as a result of the founder’s vision of the business opportunity on the internet. The very formation of the company therefore brought a service innovation in the sale and purchase of a diversified range of items over the internet. Therefore, although the company manufacturer its own electronic product (Kindle), the core of the company remains in provision of services in online retailing and cloud computing (Rose, n.p). Service innovation involves creating a service that meets the customers’ need and is executable by the company. Amazon provides online retail services, with products delivered by the company’s delivery services. Moreover, its cloud computing division provides storage and other computing services to its customers, while Kindle Direct Publishing offers free publishing, marketing and distribution services to unpublished authors.

b. Identify the major idea behind Amazon.com. Using the “Technology/Market Taxonomy”, how would classify Amazon.com offer? Justify your answer.

Amazon.com is a company formed as a mean of allowing customers to surf the company website and purchase goods. While it began as an online books seller, the company has grown to include a wide range of merchandize and services (Rose, n.p). The idea behind its growth has therefore been a focus on the customers with constant reinvention of the services provided by the company. Within the market taxonomy realm, there exist a number of businesses operating in the internet retailing business. Internet only stores, multi-channel retailers with online and brick-and-mortar stores, direct selling manufacturers and direct marketing firms (Francis and White 6). Amazon.com is an internet only store, with an exclusive distribution and marketing system. The company has no physical warehouse or store where customers can go and physically inspect or purchase goods from the store. Its wholly automated processing over the internet allows customers to place orders and provide locations for delivery of their orders. Thus, while the retail business is the company’s major activity, other services provided by the company include webhosting and cloud computing services, all based on the internet.

  • a. Discuss the business model adopted by Amazon.com?In your response, elaborate on the factors that contributed to the success of Amazon.com?

Amazon.com has been reinventing its business model from the time of launching the company. During its early years, the company listed items (books) on its website, but did not stock all the books it listed. The arrangement was to stock only a few of the book titles, sourcing the rest of the books from publishers and wholesaler, and then delivering them to its customers (Girotra and Netessinen.p.).  With an increase in its scale and competition, the company began stocking most of its products. Additionally, it also widened the breath of products it offered to its customers, to include not only books but other merchandize as well. The company’s model has additionally expanded to include a focus on timely delivery of products to its customers as well as collaborations with independent sellers, who use the company’s warehouses for order fulfilment, while delegating their logistic-related decisions to Amazon customers (Girotra and Netessinen.p.). With constant reinvention, Amazon has embarked on construction of warehousing facilities, which will allow the company to not only improve its efficiency, but also bring the wider US population into its same day delivery realm. Even more is that the company’s business model has expanded its product and service portfolio to include not only books and other merchandize, but also services such as webhosting, electronics manufacture, cloud computing services and video streaming services. The company can attribute its success to low cost, where it sells its products at low prices without necessarily compromising on quality. Even more is that the company provides a broad selection of goods and services. Thus, the company can display a wide selection of goods without necessarily stocking up the goods. The company also provides convenience to its customers, who can easily buy their goods and have them delivered at their doorsteps.

b. Discuss to what extent each one of the 4 theories of Innovation (Technology S curve, punctuated equilibrium, dominant design, and absorptive capacity) may be applied to the company.

The technology S curve is a four-staged process in the evolution of technology. It begins with emergence, proceeding to rapid improvement, declining improvement and finally maturity. At the founding of Amazon.com, online retailing was beginning to emerge, in addition to internet companies (dot com bubble). The company however continued in the improvement of its product and service offering, reflecting the rapid improvement stage. Currently however, the company can only make minimalistic improvements to its service, as it is at declining improvement as it is headed towards maturity.

  • Among Rothwell’s5 Models of the Innovation Process, which one(s) may best be applied to each of Amazon.com’s diverse product/service portfolio as per figure at end of case study (e.g. Retail; payments; devices, cloud; entertainment, drones)? Justify your answer.

Rothwell’s five generations include technology push, market pull, combination of R&D and marking, integrating business processes and system integration and networking. The innovation process as conceived by Roy is a historical overview of innovation in the Western world from the 50’s into the 90s (Kotsemir and Meissner 8). It is possible to apply Rothwell’s innovation process model on Amazon’s wide range of products and services, given that these products and services stem from the innovation process.

One of the models is integrated business processes (Kotsemir and Meissner 8), which defines Amazon’s retail services and payment services. The idea here is to provide customers with a wide range of products, as well as a safe and convenient way of making payments for these products and services. Thus, while the site offers display of the goods, the integrated payment system allows customers to pay for these goods easily.

System integration and networking on the other hand, provides an explanation on Amazon’s entertainment services. According to Rothwell’s model, system integration and networking involves forming strategic partnerships for collaborative marketing (Kotsemir and Meissner 8). Amazon entertainment is a product of this networking given that the company has strategic partnership with content providers to offer entertainment services to its customers; Amazon is not an entertainment content producer.

The second generation in Rothwell’s innovation process is the market pull, where there is a need to respond to the market’s needs. With advancement in technology, cloud computing has become a market need. More businesses are moving from physical servers and storage services to cloud computing to achieve convenience safety and real time access to company data regardless of device platform. Amazon’s cloud computing services therefore respond to this market need by providing these services to customers who need the services.

Amazon’s devices fall into Rothwell’s third generation of the innovation process of coupling R&D and marketing. Through research and development, Amazon has provided customers with innovative products such as the e-book reader, which became a popular product. Other devices such as the Fire Phone are instrumental in collecting customer data, and using this data for direct marketing to customers according to their preferences and online activity. 

Amazon Drones on the other hand, appeal to the technology push innovation process ((Kotsemir and Meissner 10) according to Rothwell’s process. The idea behind the drones is to use technology for fast delivery of products, and in so doing gain competitive advantage, while at the same time improving customer satisfaction and organizational efficiency. 

  • a. What role has IP protection played in the success of Amazon.com? Illustrate your answer by the case of the 1-Click process as well as Amazon’s brand name.

Intellectual property protection plays an important role in the success of businesses. By protecting the intellectual property innovator have a chance to launch successful products that give the advantage over competitors (Diamond 238).Additionally, through IP companies can build their brand names. Amazon’s success over the years has been through its brand recognition, largely protected by IP laws. Thus, its products such as the Fire devices and the Kindle have been successful given that they were products of the retail giant. The Kindle, as a book reader, using the company’s brand name has given the company competitive advantage over other e-book manufacturers, who although releasing similar products, have not been able to attain the success that Amazon has attained with its Kindle e-book reader. With a patent on its 1-Click innovation, Amazon has generated billions in revenue for licensing the technology to other retailers such as Apple. Protected by IP laws, the technology allows purchases using a click, a method that provides convenience to shoppers and gives the company competitive advantage over its competitors (Diamond 240).

b. What are external routes to innovation? Illustrate your answer by Amazon.com’s collaboration with competitors such as: Google, Apple, IBM and Alibaba?

Given the possibility of a company lacking some attributes and innovation to push its business, it is possible for the company to source its innovation from outside through collaboration with its competitors. Known as sourcing, the company collaborates with its competitors as a means of getting innovations into its system. By allowing Google to use its search on the amazon.com and Apple to use its 1-Click technology, Amazon gains traction in innovation as well as the use of technology it does not have.With IBM, Amazon collaborated to produce an innovative cloud-computing product with Amazon providing the basic componet of the service, while IBM provides database servers and middleware, which Amazon.com does not have. Moreover, collaboration with competitors also gives a company ideas on product development, as collaboration with Google and Apple have enabled Amazon.com to create its own device Fire Phone, which runs on Google’s Android operating system, and competes with Google’s Nexus devices on the smartphone market. It is also possible to borrow from competitors; Amazon.com can borrow Alibaba’s business model of connecting buyers and sellers, as much as it sells its own products. This way, Amazon.com can gain revenue from marketing services on consumer traffic data, as well as advertisement, as is the case with Alibaba.

Work cited

Diamond, Arthur M., J.R. “Seeking the Patent Truth: Patents can Provide Justice and Funding for Inventors.” The Independent Review 19.3 (2015): 325-55. ProQuest.Web. 10 Jan. 2015.

Francis, Julie, E. & White, Lesley. “Internet retailing: Back to the Future.” Journal of Marketing and Research 6.2(2014): 1-7

Girota, Karan and Netessine, Serguei. “Amazon Constantly Audits its Business Model.” Harvard Business Review (2013). Web. 10 Jan. 2015.

Kotsemir, Maxim &Meissner, Dirk.Conceptualizing the Innovation Process-Trends and Outlook. Munich: National Research University, 2013. Web. 10 Jan. 2015.

Rose, Gideon. “The Man Who Sells Everything: A Conversation with Jeff Bezos.” Foreign Affairs 94.1 (2015): 2-6. ProQuest.Web. 10 Jan. 2015.