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Key Problem Areas Of Amazon Information Technology Essay

Paper Type: Free Essay Subject: Information Technology
Wordcount: 5377 words Published: 1st Jan 2015

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In todays business environment, market is becoming more rapidly changing and highly competitive. This is due to the increased globalization and existence of a huge number of businesses in the market place. Therefore, there is a need for a business to be market focused and customer-centric more than ever before. However, in Ecommerce today, there is a huge competition in the business as many organisations are adopting the system in order to be more efficient and gain a competitive advantage. E-commerce is transactions conducted via electronic means such as the internet, email and SMS. It is one of the most important aspects of the internet to the community. As a result of Ecommerce, people are able to exchange goods and services immediately regardless of their geographic location and time. Therefore, due to the huge competition in the market, organisation use technology as an instrument to improve their information flow within their various business units, also help their workers to have a better understand of the ever changing and increasing needs and wants of their customers. E-commerce can be defined as “a strategy use to achieving business goals by using technology for managing knowledge and information or facilitates implementation of activities in and across value chains and also to for supporting decision-making which is essential for those activities” (Holsapple & Singh, 2000). Most organisations have recognized the benefit of e-commerce and have put their businesses online with an expectation to get in touch with their customers faster and with improved information. Amazon and eBay are examples of the fast growing organisation in Ecommerce and they are competitors in the market. Therefore, in this report, Amazon will be used as a case study. The importance of strategic information system in the management of the organisation, the use CRM in customer satisfaction and the ethical issues of the information system in this organisation will be critically analysed.

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History of Amazon

Amazon.com is a prominent Internet retail company in E-commerce. Its business includes Business-to-Business (B2B) and Business-to-Customer (B2C). Amazon.com opened its business in July 1996 by Jeff Bezos and their major service is to sell books online due to the unique customer experience the Web services could offer for book lovers. Bezos (CEO Amazon) believe that only the Internet could offer customers the convenience of browsing a selection of millions of book titles in a single sitting. Today, Amazon.com has diversified by adding to its business other item like electronics, PCs, Cars, DVD, House wares, Books and music. The business model of Amazon is designed in such a way that the technological innovation is a drive to the growth of the business. Due to the success of the technological innovation introduced to the business, Amazon.com offers more types of products at considerably lower prices compared to its competitors like EBay, Goggles etc. Amazon.com has significantly expanded its product offering, international sites, and worldwide network of fulfilment and customer service centres. Due to their success, amazon.com is measured as the largest and the most successful retail store in E-commerce.



A mission statement is a declaration of the company’s purpose. It is important for the reason that it generates the confidence and belief in the activities of the organisation. The mission statement brands the business and also differentiates the business from the competition so that customer will have full understanding of the aims and objective of the organizations.

“Our vision is to remains the earth most customer centric company, the best place for customers to find and discover anything they want to buy online”


Every business that involve a number of brains working together, there are always different observation on some certain area, for that reason it is important to have a corporate aims and objectives which will help them focus on one view and give them guidelines on their plan towards their goal. However, the main objective of Amazon.com focused on five major aspects. Mainly

Customer satisfaction




Customer satisfaction

Moreover, their focus on sustaining shareholder value actually reproduced their objective on customer satisfaction. Amazon focus on given their customer a quality products and services using the best technology available and at a reasonable price. They focus on the effective technology that will allow their customers to get what they want without even talking to an employee. Also simplify the ordering process with a few mouse clicks and make packages arrive on their doorsteps speedily. Protecting customer privacy is another key focus that Amazon takes very serious in order to give more satisfaction to their customer. They intend to offer a protective site called Amazon.com Safe Shopping Guarantee, which protects consumers from sending out their credit card details through their main web site. Amazon wants to guarantee a safe transaction. This means customer will not pay anything if there is an unauthorized charge made to his/her card during shopping at Amazon.com. Amazon believes that by means of effective technology such as secure sockets layer (SSL), the customer’s private details will be protected from the third-parties. Amazon also focuses on maintaining a customer-value proposition; meaning that all visitors to the Amazon.com site have to go away with a positive feeling about their service, at the same time as providing potential customers with motives to visit their website again. Besides that, the organization also focuses on keeping to their promises to customers by given a punctual delivery. Doing this, customer satisfaction will be strengthened.


Changing the mentality of the organization’s employees is critical to changing the business process. The corporate goals must be communicated, socialized, and supported. Otherwise, the organization will spend millions of dollars in time, software, and hardware with negligible results. However, Amazon is trying its best to make the objective of the organization well known and understandable to its employees.

Another area of their objective is to offer the best working environment to their employees, promoting career opportunities, hiring and retaining versatile and talented employees, and weight their compensation to significant stock ownership rather than cash. Amazon focuses on meeting internal responsibilities like given equal opportunities for applicants and workers and by making diversity and training more significant characteristic its hiring process. Amazon focuses to employ individuals from different backgrounds.[2]. Concerning employees training and development, Amazon focuses to offer workers the opportunity to work and learn in order to improve their skills, also focuses on given reward to employees who are hardworking.


Amazon has an objective to increase their sale by selling anything that can be sold on the web. By reorganization the sales process and improving the shopping experience we increase the conversion rate and the average ticket price.


Amazon desires to build shareholder value by maximizing its profit. According to the letter from the chairman of Amazon in 1997, “a fundamental measure of our success will be the shareholder value we create over the long term.” Shareholders are the owners of a business, and they are mostly concerned in look after their investment in the business as well as growing their individual capital. Shareholders have invested in the business for the reason of having the pay back as bonus when there is an increasing stock price. If there is no profit there will be no dividends and if profits turn down it will as well affect the stocks. Since the fall down of the internet stock market in 2000 the stockholders are very worried with the company and it might take away their trust in the objective of the business.



Environmental analysis can be expressed as factors/features that influence or increase the quality of strategic decision making. These are factors which may help in achieving the objective or may also act as a barrier. The environmental analysis can be divide into two aspects namely as;

Remote (Micro) Environmental Factor: Factors which a company or organisation have no control. These factors are;








International policies: International policies have a vital role to play in the growth of an organization. International policies may hinder the growth of Amazon in particular countries; for example, Government of china has banned Google with an allegation that Google possesses an improper contents in his database which is a threat to the community and national market as well. As a result of this, Google as lost his potential market in china which is a big lose to the organization

Regulations: Some countries do not consider e-commerce as a safety place to transact business for example in Nigeria, most people does not have trust in integrity internet and they also lack knowledge of online transaction. They also believe that internet an easiest place for crime perpetrators.


Exchange rate: Exchange rates can also have a huge negative impact in the profitability of Amazon. A country like Nigeria where 250 naira is equivalent 1 pound, it will be costly for customers from Nigeria to purchase from Amazon’s UK website.

Economical tendencies: As a matter of fact, most people prefer buying from their traditional shops and instantly get what they want rather than undergoing several processes to satisfy their needs.


Ethical and religious factors:

Some cultures believe that internet contents may damage ethical and their cultural believe. Therefore, they are restricted from using the internet


Amazon.com is trying his best in the technological field aspect and it has been a great achievement for the organization. However, Amazon still need to do more in technological innovation in order to stay ahead of his competitors.



Customer Intimacy – The Level of customer closeness, community building, and personalized marketing has made Amazon to do extremely well in the competitive market. Amazon has successfully created an effective relationship with its customers, and by good quality of its comprehensive information management systems, Amazon has been able to succeed in the area of customer intimacy.

The business model: The business model of Amazon has given them the advantage to increase in profitability without incurring any highly cost.

Diversification: Amazon offers their customer a variety of products in various geographical markets, this has lead Amazon to a large stability in ecommerce. .

Brand recognition – Amazon has gained popularity in the Area of online book retailing, and has thus, extended to various items, products and services. They have been able to accomplish this through their constant innovation and by keeping customer satisfaction as its main priority

Technology – Amazon has also been able to maintain its customer steadfastness through its advanced innovations technology e.g. updates of delivery schedules and e-mail responses.


Weak Financials – As stated above, even though Amazon has posted a profit in the 3rd quarter 2003, after interest is paid, the company is only making profits of $22 million on revenues of $1.1 billion. 2003 (“Amzn – amazon.com,” 2003).

No Manufacturing Facilities – This leads to dependence on the suppliers and their cost efficiency. It also creates issues with trust. Amazon is forced to trust the suppliers of items they don’t store to ensure customer satisfaction. This could lead to degradation of the Amazon.

Rigidity – Amazon is not so successful with the other product categories, such as clothing, like it is with the books.

Dilution – Amazon is trying to do restore anything that is obstructing its image. It has such a large product category base that it has to focus itself on certain product categories to avoid brand dilution, which creates gaps with other products.


Economic developments of some developing countries are experiencing economic growth.

Trend of online business is increasing – Lifestyle changes, population, and demographics support online retailing and buying

Opportunity of alliances – This could create an extended market without the bother of having to manage everything.

Business 2 Business transactions are increasing considerably – This generates additional revenue from consumer transactions.


Strong regional competition – Increased competition through eBay, Yahoo, and Google

Technological changes and emergence of new technologies – Using the Internet effectively to increase the reach to consumers while reducing the integration cost.

Challenges of legal, security and privacy issues – Using current technology to ensure adherence to legal, security and privacy concerns.

High inflation and fluctuation of foreign currency exchange.

Government regulations and political instability.

Expansion into new countries and into new product segments creates risks as Amazon must adapt its technology and business practices to diverse international environments.

Fluctuating of free shipping expenses and the Amazon membership expenses



In this competitive world of business most companies tends to pick the most suitable strategies to meet their goals and objectives. Using a SWOT analysis is a very strong step to develop a strategic model for an organization operating under a competitive environment. However, many businesses have found that using effective and efficient information systems allows them to tackle with external forces in one of four ways: low-cost leadership, product differentiation, focus on market niche, and strengthen customer and supplier intimacy. Organisations will only succeed if they develop and implement strategies to effectively counter all 5 identified forces

These forces are:

Bargaining Power of Customers

Bargaining Power of Suppliers

Rivalry of Competitors

Threat of New Entrants


Potential Entrants

Amazon has out an entry barrier to the market by their absolute cost advantage.


Amazon will always have suppliers due to the fact that its consumer is the supplier.

Amazon needs to fight against thievery fraud, so the consumer will have a good experience and creates a relationship with Amazon.

Suppliers could prefer to go to other organization, if they are not fully satisfied with the service offered to them.


Amazon can lose its customer due to inefficient customer services. Amazon must as well fight against thievery and fraud in order to keep their good reputation.

Buyer could prefer to go to other organization, if they are not fully satisfied with the service offered to them.


Buyers have tendency of moving to another organization for better services as they have different alternatives for their needs.

Industry Competitors

Ebay.com, Aution.com and Overstock.com are the main competitor for Amazon.

Key problem areas of Amazon

In the analysis above, it is clearly observed that the major area where Amazon is lacking behind is the area of customer services. In today’s rapidly changing and fast growing business environment, it is important for every organization in Ecommerce to effectively improve in their customer-centric business processes. This will enhance their ability to have better understanding of their market target and also the needs and wants of their individual customer. Better understanding of this scope has really helped eBay to have a competitive advantage in the market. As a matter of fact any lapses in delivering total satisfaction can leads to a loss of confidence by the customer towards the organization and leads to a successive gain for the competitor. Therefore, the major factor which caused Amazon to fail has been identified to be the lack of customer-centric models in the development and execution plan of its business.

Recommending strategic model

In this competitive business environment most organization uses the most suitable strategies in other to meet their goals and objectives. However, one of the below listed generic strategies can implemented. These are;

Low-cost Leadership

Strengthen customer and supplier intimacy

Product differentiation

Focus on market niche

Total satisfaction of the members of the targeted customer group should be the major concern of all organizations (Jones & Sasser, 1995). I will recommend strengthen customer and supplier intimacy. This is due to the fact that the main problem identified by the model above is basically on customer services. It was revealed by the success of eBay that the main solution to customer loyalty is to make the customer happy completely in all aspects of transaction with the organisation. Due to the nature of Business of Amazon, it is shown that customers are also the major suppliers in the business. The nature of business allow customer to buy online and as well sell their product through the same medium. Obviously, if the customer is delighted in every transaction with Amazon, they will have more confidence in the organisation and this will prompt to have more transactions with them. In today’s highly competitive business environment, every organisation is trying to become more information oriented about their valuable customer, this play a vital role in developing an effective strategy for having a competitive advantage. It has been proved through the success of some organisation in Ecommerce that customer satisfaction is directly in proportion to loyalty of the customer with the organization, leading to subsequent profits for the organization (Anderson & Mittal, 2000). Amazon have an objective to remains the earth most customer centric company, the best place for customers to find and discover anything they want to buy online. Therefore, they have to adopt a strategic model that can stand in line with the objective. Effective communication between Amazon and its customer will help to build a high brand value in the mind of its customer and this will lead to high level of customer confidence and trust in the organisation. Customer and supplier intimacy improves the effectiveness of an organisation by identifying new markets and area for expansion and also improve customer value, satisfaction and profitability and retention (Andersen & Jacobsen, 2000). It is quite understandable that the secret to the success and profitability in ecommerce is customer retention. It helps to ensure customer loyalty and repeat customers. Customer satisfaction leads to large turnovers and profits. In addition, through customer referrals, it will be easier for Amazon to grow its prospective database add new customers in a cost effective way. Amazon is not actually lacking behind in the aspect of customer services but more work has to be done to ensure they are working with the latest technology to carry out these tasks.

Benefit to the organisation

The benefit of this recommendation is that Amazon.com would be expanding on an existing service offering and would not incur any developmental or start up expenses. Adopting this recommendation will also help Amazon to:

Attract new customers,

Increase customer loyalty and retention

Increase sales

Increase profits

Also increase growth.



Key performance indicators help organisations to achieve their organisational goals through the measurement of their progress. The key indicators are agreed upon by an organisation and are indicators which can be measured that will reflect success factors. The KPIs selected must reflect the organisation’s goals, they must be key to its success, and they must be measurable. Key performance indicators usually are long-term considerations for an organisation.” Below are the key performance indicators for Amazon.

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Another success factor for amazon.com is the company’s ability to innovate. Technology is a tools that can be created by another programmer and perform the same function. Therefore, innovation has to be ongoing processes. However, Amazon is keeping leading by adopting any latest technology that could help the business. The area of innovation shown by Amazon was the use of collaborative filter technologies which suggests products that each individual buyer might like by comparing them to other user’s preferences. Also their 1-click, This system enable the customer to buy whatever he wants with only 1 click, and nothing else because all customer information including addresses, credit cards and shipping preferences are stored in a Data Warehouse, facilitating the check out process.


Amazon provides personalised transaction medium for its customer and also provides them with useful information and more choices in all their transactions, which could not be found in other Ecommerce organisation around, this allows customers to transact with low cost and high quality. They provide facilities like complaints, product rating, description, reviews, comparison, discount, and ranking prices. These features enhance the convenience transaction of the customers. Amazon is highly improving in building and maintaining its customer relationship management (CRM).


Amazon is offering cheap and fast shipping to their customer; this has helped them to overcome the fall back between the buying and delivery of a product. Amazon gives unlimited free shipping for most its item and customers orders are also attended to in-house. However, to accomplish this unbeatable logistics, Amazon has many distribution centre around the world and each centre is highly equipped with modern material handling equipments and this has enhance their ability to deliver to their customer at a very efficient manner.


High developments have been brought to the market in the 21st century through the E-business. Amazons has made business across national borders to become well known and acceptable through the world. Amazon know the important of wide reach and has spread widely by building a separate websites for the united kingdom, Canada, Germany, Austria, France, Japan, and china & also penetrated the black in 2003, this has made a positive impact their profitability.


Amazon.com has spent reasonable amount in other to get its name well know in the market and build brand awareness. This has helped the organisation to bring people to its site. As a matter of fact, Amazon has established partnership with search engines like yahoo and some other establishment. This has helped the organisation to build a very strong name in the competitive market.

Information required at each managerial level

The managerial level are divide into 4 levels namely as;

Information required in Strategic level

Information about the sales target

Information about a new product to introduce to the business

Information about the profit target

Information about economic trends

Information about investment needs

To acquire information about, what are their competitors doing overall in business

Information about stock and commodity prices

Information required in Tactical level

Information about the performance of the employees

Information about the staff to be recruited or omitted to strengthen the company

Information about the stock

Information about the competitors charges in terms of prices.

Information about how to maximize their profit

Information required in Knowledge level

Information about the latest technologies to the business

Information about the offers to be provided to their customer

Information required in Operational level

Information about the price on order

Information about the daily transactions

Information about the stock

Information about how to deliver goods to the customer.



Information systems are vital to the operation and management of every organization. Managers investing in IS are interested in the benefit their organizations gain from this investment. Majority of operations in an organization revolve around decisions made by the management and other key stakeholders in the organization. And in order for decision to be made adequately, it is vital for there to be a good information system since decisions are based on information available. In relations to this, Jahangir (2005) states that based on the significant role that information plays in choice of decision to be made, organizations must ensure that they have a good management information system. However, it is very essential to judge the degree of business important of a system before making a decision on the appropriate information system that will be suitable for the business and how to manage this system. Therefore, for management information system to have an effective impact on a business, instrumentation and the output of the system has to possess a number of attributes that would give competitive edge to the organisation, this attributes can be defined by the needs of the organisation. There must be full understanding of the value generating attributes associated with information needed by the organisation in order to determine the information system that would promote the organisation (Wendy, 1997). Essentially, before deciding on which MIS strategy to use, it is vital to ensure that the choice made is fully compatible with the current system. This will not only help in avoiding erratic choices but it will also save you the time and money (Rhodes, 2010; Jahangir, 2005). Furthermore, the below listed system can be adopted by Amazon for their competitive weapon

Online support system

Amazon is using some technologies that are unique from its competitors. Among these technologies is their One-click shipping, email alert to customers etc. However, Amazon should also improve its online support to customer and provide them with wide-ranging and timely product information. To enhance the customer experience the Website needs a live person Chat Software System where customer can have immediate help through the website.

Discount and allowance pricing systems

This is information system can be used to adjust the prices in order to compensate customer for their loyalty. This compensation can include buy one get one half price or free. Discount can be given to customer in various forms e.g. cash payment discount, a price reduction to customer who frequently transact valuable businesses and also to customers who refer their friends to the business. This will help Amazon to retain their existing customers.

Promotional pricing system

Amazon can use promotional pricing system can be used to temporarily price their products below list price and even below cost in order to build up a buying excitement in customers. This will allow customers to buy more from the organisation and expecting that they will even buy other items at normal prices

Segmented pricing system

Amazon should use information system to adjust necessary prices in order to allow different prices for different customers in different location. In segmented pricing, Different customer may pay different prices for the same product or service. E.g. Students may charge a lower price for a certain product. Amazon should also use information system to decide what prices to charge in the different countries in which they operate.

Business alliance system

Business alliance system can be used by Amazon to have an alliance with other retailers or establishment. This will allow both organisations to offer exchange privileges between their website. Amazon will make its online inventories available on its partner’s website, and if customers buy any items through its partner, the partner will receive a commission. Likewise, if a consumer purchases the outside merchant’s goods through Amazon, Amazon will receive a commission.

Online auction system

Improved Online auction system gives customers more control over price and also enhanced customized services to the customers. Online auction system will also help the customers to have full knowledge of their product type. This system will reduce customers search cost and add to both convenience and savings.

Additionally, Information Systems can be used at each level of management in order to gain a competitive advantage in the market. It helps the managers in the following ways.

Changes the way managers monitoring

Changes the way managers evaluate

Changes the way managers compensate and reward

Changes the way managers control processes

Changes the way managers provide feedback


Customer relationship is an asset to an organisation and Customer Relationship Management (CRM) is all about managing that relationship effectively. Managing that relationship effectively is also about how organisations use Information Technology to manage their relationships with customers in order to create value for both the customer and the company. Looking into an organisation viewpoint regarding customer satisfaction, most organisations believe that fulfilling customer needs are a major foundation of achieving their objectives and generate more income (Szymanski & Henard, 2001). Therefore, the major objective of Customer Relationship Management is to discover, satisfy and retain the company’s most value added customers. It is very important for Amazon to have a full understanding of buying behaviour trends. In this Internet age, where decisions are usually made by a click of a button, it is more important for Amazon to send their vital information through an appropriate processing means in a timely and effective manner. This will create an opportunity for rapid and adequate response to their customer needs and provide an excellence customer support which can lead to healthy and profitable relationships with the customer. But Amazon is far from unique in using CRM. Making customers feel unique because you understand their likes and dislikes is difficult but critical. CRM systems allow a vast amount of input about a customer in order to build a comprehensive profile and to get a better picture of a customer. This will help to determine the right products and services to render at the right time. IT systems are essential for successful implementation, both to facilitate contacts with customers


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