Amazon: Taking Over the Online World

The rapid pace at which the world is changing is forcing the managers of all kinds of companies to develop new strategies to protect their competitive advantage. If they do not, they will be overtaken by agile competitors that respond faster to changing customer needs. Nowhere is this truer than in the cut-throat mobile computing business.

Billionaire founder Jeff Bezos incorporatedAmazon.com, Inc. in 1994 and opened its Internet store in July 1995 with the aim to provide "earth's biggest selection."His strategy was to offer an unlimited selection of books and, where possible, to have them shipped directly from distributors to customers. The company grew to mammoth proportions, taking much of the book retailing business with it. Circuit City, Borders, and others succumbed to the competition and closed shop, unable to match the variety of online goods and delivery service. Amazon launched an online TV and movie store in 2006, the Kindle e-book reader store in 2007, and the MP3 digital music store in 2008. Later, Amazon aimed its sights on Netflix with an instant video streaming service that is free for members. It also now offers customers an online auction service and sells just about everything, including furniture.

Today, Amazon aims to provide "earth's biggest selection" by selling everything from diapers to digital televisions online. Best Buy had to cut the square footage of its big-box stores as Amazon commoditized whole product categories that it sells. Walmart has not been able to match the reliability of its shipping network. Companies like Zappos and Diapers.com that could match Amazon in price, selection, and customer service have all been acquired by Bezos. Amazon is growing in leaps and bounds, while the competition is lagging.

One of the biggest growth areas Amazon has experienced is in developing its own hardware e-readers and providing cloud computing services. The Kindle series e-reader devices not only entice people to buy their books from Amazon, but also make it easier for them to useAmazon.comas their primary e-commerce site for the huge range of consumer goods it provides. Kindle Voyage owners can watch newly released films, scroll through magazines, and access their music collection on Amazon's cloud computing servers, adding more clout to one of the world's fastest-growing retail operations.

Bezos's strategy to compete with Apple's iPad is two-pronged. First, it offers apps based on Google's Android system that direct users to Amazon's own content and optimize the shopping experience by doing away with the clutter on the main Website. The browser, called Amazon Silk, will make it easier for customers to browse and shop online because it allows free storage of data, music, and movies on its vast cloud computing servers instead of these items being stored only by the browser in the device. Owners of the Kindle Voyage e-readers get to store as many books, songs, movies, and personal documents on Amazon's cloud servers as they like. The second prong is the price. The Kindle Voyage retails for significantly less than the iPad or BlackBerry's Playbook. Bezos is able to undercut the competition because he expects customers to make additional purchases of things like toys, toasters, tires, and even groceries.

So, although margins may be small on the device itself, Bezos is banking that the tablet will funnel users into the company's e-commerce and cloud computing domains. The company also generates revenue from membership fees for preferential delivery services. And, if that were not enough to strengthen its competitive position, Amazon publishes books in physical and e-book form, placing it in direct competition with the suppliers it once relied on.Amazon's already-thin profit margins could face an even greater threat since Apple got into cloud computing.

On the rivalry between Amazon and Apple, Bezos says that "Everything we do is driven by seeing opportunity rather than being worried about defending... Both companies like to invent, both companies like to pioneer, both companies start with the customer and work backwards. There is a like-mindedness... Are two companies like Amazon and Apple occasionally going to step on each other's toes? Yes."

`1.Apply Porter's Five Forces model to the tablet computer industry.