Introduction
Amazon is an American multinational technology company which provides one of the biggest ecommerce services in the world more than 15 countries spanning more than 3 continents. Amazon is diversifying and also expanding very fast and also reported to earn 59.7 billion dollars in first quarter of 2019 which then moved to 63.7 billion dollars in the second quarters. Amazon was founded by Jeff Bezzos on 5th of july 1994 in Bellevue, Washington. The company initially started as an ecommerce website selling books online and then gradually diversified and expanded to selling other products like music and video CD’S and dvd’s by 1998 and by 1999 it started selling consumer electronics, video games, software, home improvement items, toys and much more. Some of the major competitors of Amazon in the industry are Walmart, Ebay, Alibaba, Netflix and many more. Amazon has more competitors than any other company because of its diversification and buying companies over the years. In the process of diversification Amazon has acquired and has invested in at least 128 companies.
Amazon’s diversification has opened opportunities for amazon to enter into new businesses such as shoe retailing for both men and women, cosmetics, pharmaceutical, fresh food, baby products, linen,paper and cleaning supplies, frozen food, spare parts, assorted goods, furniture, dog food along with groceries. Amazon’s diversifying strategy is a bold move to remove competition while increasing profit margin while increasing its market share. Amazons main profit comes the Amazons web services which was opened as a subsidiary in 2001 in order to diversify by providing services such as secure cloud services platform, offering compute power, database storage which stores all the information very secured, content delivery and other functionality to help businesses scale and grow.Apart from the AWS(Amazon Web Services) Amazons most recent diversification in the form of Prime services also known as Amazon Prime which gives benefits to the prime users of free and fast shipping for eligible purchases and streaming of movies,tv shows and music along with exclusive shopping deals and many more. Currently Amazon has an estimated 105 million subscribers in the U.S.A alone which went up from 95 million subscribers from 2018 and there is an expected increase in the number of subscribers of Amazon prime which rises up to 122 million by 2022. And also prime services generates an large amount of revenue which contributed to the 59.7 billion dollars in the quarter 1 which went up to 63.4 billion dollars in second quarter. In the way of diversification and expansion Amazon entered into 5 new countries in the past five years such as Turkey, Brazil, Australia, Mexico and India.
Amazon the largest e-commerce giant in the world will also have to overcome several challenges that has risen due to diversification by the company throughout the years.
Methodology
The data is used to measure the success of the Amazons diversification to increase its market share is mainly from secondary sources. I have utilized many news articles, case studies, journals, websites, books and other articles. I have taken care to balance the arguments and avoid biases. Other data used in the essay are the financial data/statements collected from the archives of the corporate websites and news articles. By using an wide range of resources, an objective viewpoint and argument have been built where finance and marketing are used as the basic tools for measuring the success of the amazons diversification to increase its market share. Its essential to understand the condition the global market along with the ecommerce industry and how the competition by other companies like ebay, alibaba, flipkart, snapdeal and many other ecommerce brands and how the competition influenced amazon to diversify for increased profit margin and increased market share to become the largest e-commerce giant in the world,the data and information from these sources will be used to process a detailed evaluation of the success of Amazon’s diversification to increase its market share. The ‘success’ of the above diversification strategy to increase Amazon’s market share will be defined with business tools like SWOT analysis, PEST analysis, Force field analysis, Ansoff matrix and Balance sheet analysis. These tools will help in better understanding of the different constrains, limitations and opportunities of the diversification stratergy of amazon to increase its market share. Force field analysis will be an effective tool which will provide framework for the factors that influence a situation such as helping forces and hindering forces.And the financial data can be used to conclude on the outcomes of the Amazon’s diversification to increase its market share.
Amazon’s diversification to increase its market share: Background analysis and Aims
Amazon was founded by Jeff Bezos in 1994 as a website which initially started by selling books whose speciality was delivering books to anywhere and anyone in the country along with the fast delivery. But as the company grew very fast over the years such as amazon had around 180000 customers by 1996 and had around one million customers by 1997 and its revenues also jumped from 15.7 million dollars in 1996 to 148 million dollars in 1997 followed by a huge amount of 610 million dollars in 1998. The main reason behind this quick success of amazon was the diversification throughout those years by selling music and video cd’s and dvd’s and also by expanding its business into international territories in the United Kingdom and Germany in the early years of the company. And as the technology upgraded over the years and also as the years passed by Amazon stuck to its diversifying stratergy to remove the competition from its competitors while achieving more revenues and increasing its market share. The diversification stratergy also included acquiring companies which then acted as a subsidiary of Amazon while also having stakes in other companies if Amazon didn’t acquire it which ultimately acted as a venture between both the companies. Also Amazon has stakes and has also acquired in more than 128 companies in Amazon’s entire history. Also Amazon has invested more than 20 billion dollars to make its top 10 acquisitions. Amazon also paid more than double the value of a company to buy it in fact amazon paid more than one billion dollars not once or twice but four times to buy a company including eight of Amazon’s top acquisitions were valued at more than 500 million dollars. Here are the few companies that amazon bought as a subsidiary to diversify:-
- Whole foods:- amazon’s diversification stratergy always included the groceries but as amazon groceries failed drastically so they opted to buy whole foods for an stragerring 13.7 billion dollars which Amazon overpaid by ten times.
- Ring:- the company was basically known for wi-fi enabled live video doorbell system as a smart home security which amazon bought for 1.2 billion dollars and this helped amazon strengthen its smart home offerings.
- Pillpack:- Pillpack is a healthcare company notably the most recent acquisition by Amazon for 1 billion dollars.
- Twitch Interactive:- It is a video game community and it’s mostly famous for its streaming of live video games.Amazon bought it for 970 million dollars so as to diversify in the gaming sector as gaming is a very profitable business now a days.
- Quidsi:-It is an e-commerce platform for selling baby care products,beauty products along with household products which Amazon subsequently acquired it for 500 million dollars in 2011 as a part of its diversification. However the company was shut down by Amazon due to profitable concerns.
2019-10-4-1570165483