Santa Monica College Business Model and Amazon Exponential Growth Discussion

Hi i need you to write a response back basically making a commentary of about 300 words each on these students posts.

Peer 1 Today Amazon is a tech giant, a big leap from its humble beginnings as a retail store that sold books to a company that has set the bar for online retailing, all in less than 20 years. According to Jeff Bezos, Amazon is a customer-centric company. Amazon makes money as an intermediary, a switchboard model, connecting multiple sellers to buyers through its retail, subscriptions, and web services, among other channels. Thanks to Prime, Advertising, and AWS, Amazon has created a diversified business model. “Amazon operates with razor-thin profit margins and succeeds due to a combination of economies of scale, cost leadership strategies and innovation of various business processes, along with constant business diversification” (Dudovskiy, 2020). The company understands, though to continue to shift ahead of the competition, they must stay focused on what it stands for in the minds of consumers, “reliable logistics” (Greenspan, 2019). Amazon’s strategy is driven by its sources of competitive advantage, wherein it is focusing on, “technology, actualizing the benefits of economies of scale, and leveraging the efficiencies from the synergies between its external drivers and internal resources which have long been cornerstones of its business model” (Juneja, 2015). What made Amazon so compelling is the model for creating long-term value and regenerating that value for other components of the company. Consumers can price shop instantly and get merchandise fast. Sellers have access to untapped markets and can even decide whether to carry their inventory. Amazon has its fulfillment center that manages the lists for its seller channels. Accessible to market entry for new sellers wanting to start an online store to lower entry barriers. Developers and enterprises can rely on AWS cloud services even though Amazon makes almost 70% of its revenues through product sales. “The larger Amazon gets, the more it can invest in lower prices, logistics, and expanding its catalog, which in turn creates a virtuous cycle leading towards greater sales per customer…clearly showing customers the value, it can create” (Fox, 2015).

Amazon has an extensive pricing theory strategy, “tweaking millions of individual price changes per day, taking advantage of the psychology of price perception” (D’Onfro, 2015). This behind-the-scenes technology learns about consumer shopping behaviors and adapts in real-time, training consumers to associate lowest prices through Amazon over time, hoping to drive more traffic and more sales. The company’s generic corporate strategy can be described as concentric diversification. This means the company excels at leveraging technological capabilities for business success and follows a low-cost leadership strategy. The online shopping giant’s entertainment arm is quite a program. The entertainment acquisition strategy is to entice people to become Prime members, a goal which is bluntly summed up in this 2016 Jeff Bezos quote: “When we win a Golden Globe, it helps us sell more shoes.” Amazon sets up the future monetization of its streaming services by first using it as a “free” way to get people through the door and hooked on its perks” (Campbell, 2018). They see this as a perfect model of what will grow Amazon’s profitability into the future. TV and film customers renew their subscriptions at higher rates and are a see overall strong conversions than members who do not stream video on Prime” (Dastin, 2018). Amazon continues to create value in many ways, “further scaling its operations. This process provides a continuous ongoing cycle of value creation” (Fox, 2015).

peer 2 Costco is a grocery and retail giant, it was the world’s 10th largest retailer in 2017, and its clubs are worth 96% of their sales. (EuroMonitor 2018). The company is growing steadily yearly (6% in 2017, [EuroMonitor 2018]). However, Costco is up against two main challenges to continue building and providing value as defined in the SWOT analysis. Primarily, Costco has put itself in a risky position by being so heavily reliant and dependent on its North American locations (responsible for 86% of 2017 global retail sales, EuroMonitor 2018). They have not globalized as quickly as they should have to expand their brand on a global scale. It is not a wise strategy in the case of such a large company to be dependent on a single market. That being the case, Costco has been ramping up efforts to expand internationally in recent years, adding 7 new international warehouses in 2017 (EuroMonitor 2018). Costco has seen success in these new markets with a huge new membership sales jump at the opening of the new locations. Additionally, Costco is seeking to improve value by honing consumer trends and expanding its online presence to create speed and convenience for today’s shoppers. They recently introduced a 2-day delivery program as well as partnered with Instacart for same-day grocery delivery services. These services provide value for today’s younger consumers, who want to spend as little time at the store as possible. I believe that their corporate theory is undergoing some evolution currently with the rush to go global, but I do see how they created a “Web” of synergistic services. They have their retail warehouses at the center and their webs expand out into; gasoline, pharmacy, auto, food court, big-box products, travel incentives, etc. They have captured immense market share in North America with this theory, now it is time to amend it for multiple international markets.