Amazon and Distribution Channels Research Paper

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Amazon represents one of the modern success stories that is similar to other stories such as Microsoft and Apple in many ways. For example, the company originally started in a garage with a limited budget. The company's founder, Jeff Bezos, focused more on the potential for new distribution channels to be built rather than any specific product. Books were only one of the products on a long list of products that were identified as having potential in the distribution network that he had in mind. However, after much deliberation Bezos decided that books were the ideal product to start with. After the first month of the sites launch, the company was selling to all fifty states and over forty countries. This format had many advantages over a traditional brick and mortar store such as the ability to have a virtually endless inventory without actually having to stock the products. For example, if a customer would order a book that was not in physical inventory, Amazon could simply order the book at that time or even drop ship it from another third-party location.

The company eventually began to add more products such as CDs and DVDs. Then it began to add even more products. Finally, through a series of further developments as well as a long list of acquisitions, the company has become the retail giant that we know today. Not too long again, the value of Amazon (which is about two hundred forty-eight billion) exceed the value of Walmart (worth about two hundred thirty billion) for the first time making Amazon the world's largest retailer (Hartung, 2015). When the economy suffered in 2008, Walmart's massive infrastructure was cited as the factor that is responsible for this trend.

Amazon's Bookstore Strategy

Amazon's use of distribution channels was largely responsible for its initial and ongoing success. Distribution channels can often create interesting situations when there are vertical or horizontal consolidations. Amazon has recently integrates backwards with the intent of attracting suppliers and the expectation of utilizing other outlets for full distribution of its products. For example, Amazon began to position itself in the center of every point of the distribution channel at multiple positions. For example, the company can now act as a publisher and publish an author's book. This allows them to push it through traditional distribution channels that are not under Amazon's control. For example, if Amazon publishes a book for a client, it can then push this through the distribution channels of its competitors, such as Barnes and Noble or even independent bookstores. This strategy has significantly expanded Amazon's control over the publishing industry and represents the innovative strategies that they have used to control distribution channels that represents their level of current success.

Yet at the same time, the strategy to dominate the distribution channel and integrate vertically expand backwards has not come without controversy. For example, Barnes and Noble, the largest traditional bookstore chain, which also has a significant online business, has decided not to stock Amazon's products in the hope of discouraging authors from signing publication contracts with Amazon. Other moves by Amazon have been even more emboldened. For example, probably the most Amazon brazen move took place during the holiday shopping season of 2011, when Amazon launched a Price Check app discount that encouraged consumers to browse in brick-and-mortar stores, then open the app, check prices on Amazon -- and get an extra 5% discount for playing along and buying the item at Amazon (Tuttle, 2014). Because of aggressive competitive strategies such as these, Amazon is on the forefront of controversy and many have called for an all-out boycott of the industry leader.

Amazon Web Services

Many consumer are virtually unaware that a large component of Amazons future strategy is based in the cloud. Organizations have been increasingly adopting the use of cloud-based technologies in the last five years and Amazon has again positioned itself at the center of this trend. This trend has caused a significant shift in the way that many organizations interact with information both internally and externally. Yet there are also many risk factors inherent in these technologies, some of which are the result of insider conspiracy (Brender & Markov, 2013). Cloud computing offers many advantages over traditional IT infrastructure which make it an attractive option, however it also exposing organizations to new forms of security issues (Brender & Markov, 2013). Amazon is at the forefront of developing this platform and addressing the related security risks that have plagued this system from its inception.

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Comment by author: I don't know why this is worth noting, because you haven't defined it yet, nor the field in which it is studied

Amazon Web Services (AWS) is the industry leading provider of infrastructure web services that are offered through the cloud. One of the primary and most attractive features of the AWS infrastructure is that it is incredibly affordable since organizations can pay per use -- again Amazon has positioned itself as the low cost leader in this market. This makes the services attractive to smaller organizations that do not have the capital for expensive IT infrastructure projects. Not only can applications be offered as a service (SaaS) but an effectively unlimited amount of data can also be stored online through Amazon Simple Storage Service (Amazon Web Services, 2012).

Amazon S3 offers a simple web services interface that can be used to store and access any data, at any time, from anywhere in the world with internet access. This system is relatively basic compared to the competition but offers a range of customization opportunities. This is especially handy for developers since they can access data and a virtually infinite number of objects in a range of different buckets. Data can be retrieved through developer assigned keys to ensure security as well as the data being encrypted during transfers to ensure that no unauthorized users have access. Although security was a major concern during the initial stages of cloud development, Amazon has now developed several mechanisms that work together to mitigate many of the security risks found in the cloud.

Other services offered by Amazon include the Amazon Elastic Compute Cloud (Amazon EC2) platform. This platform is designed to make scalability, manageability, and adaptability within reach for developers of all types. This platform offers a simple web service interface that allows developers to obtain and configure capacity with minimal friction (Amazon Web Services, 2012). Amazon EC2 can actually allow developers to boot new servers to handle additional capacity within minutes. This offers both scalability and convenience at price that is often much cheaper than organizations trying to accomplish this in-house. Furthermore, this technology also make downsizing capacity just as simple and therefore capacity can be easily managed as computing requirements change. As a result this changes the costs associated with both private and public computing through the cloud.

Due to technologies such as the Amazon EC2 platform, developers can pay only for the capacity that they actually use and don't have to make massive investments in infrastructure internally. This is a revolutionary concept in cloud computing that is believed to be able to change the way software is distributed and managed and be a disruptive technology. Where once it was the case that companies had to spend massive amounts of capital to build the infrastructure that was required to manage their computing needs, due to the invention of the cloud infrastructure this is no longer the case. Now developers can compete with larger organizations and bypass the massive capital expenditures because they can take advantage of the scalability and economic incentives that the cloud offers. This is consistent with Amazon's strategy of promoting ecommerce and positioning itself at the center of the growing industry.

Discussion

Amazon has definitely been a disruptive force in many industries and has largely changed the ways consumers shop. For the most part, it is argued that Amazon's competitive strategies have benefited the consumer. Amazon has been fixated on being the low-cost provider since its inception in the garage of its founder. To achieve this low cost position, Amazon was one of the few large businesses that operated for several years before actually making a profit. This operation required massive amounts of investment from external investors. Furthermore, it was able to achieve this throughout the dot-com bubble of the early 2000s. The companies that survived the dot-com boom, were the strongest players in the industry.

Amazon's success was not due to product innovation which also represents a unique aspect to the company's innovation strategy. The company's market strategy was solely concentrated on the distribution channels that the emerging ecommerce platforms offered. In fact, in the beginning of the strategy design, the company didn't really even have a specific product picked out; it wasn't until later that Amazon decided on the book retail industry. However, when Amazon did enter this market segment, that created some of the most notable momentum to be found anywhere in the history of business. The ultra-competitive.....

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