Amazon Value Chain Analysis (Primary and Activities Support)

Value chain analysis basically helps identify the business activities in the company’s value chain to pick out the opportunities available for improvement. Amazon has gained the brand name through the services it provides to customers.

Value chain analysis provides better insight into the activities of amazon. It also supports checking each activity in a company value chain to find out where opportunities for improvement reside. In amazon’s value chain analysis, there are primary and support activities.

Primary activities include marketing and sales, inbound and outbound logistics, services, and operations. While in support activities, infrastructure, technology, human resource, and technology is included. Amazon’s value chain analysis has played a crucial role in the success and development of the brand.

Overview of Amazon:

Amazon is considered the famous and world’s largest online retail business market and ranked as the top technology company. It is headquartered in Seattle, Washington. This company was originated in 1994 by Jeff Bezos, who first thought of selling books online.

However, the founder soon realized the worth of online business and expanded to more products. Today, it is the world’s largest online marketplace with thousands of items. Along with its major US market, Amazon has expanded its business to several other countries as well.

Currently, it has branches in Canada, Germany, UK, Spain, Australia, Sweden, and others. This company also provides services related to cloud computing, artificial intelligence, and digital streaming.

Diversity is one of the main reasons behind amazon’s success. Although the online retail platform is still its major focus, Amazon has entered other markets like the technology market.

Amazon.com’s initial thought was not to carry any inventory. However, the company started carrying inventory in 1997 in order to have more control over deliverables. As this company grew, it enabled small sellers and businesses to sell through this platform.

Amazon has inspired many other businesses to enter in the same model. However, competitors are not able to reach the level of Amazon. The brand name has acquired the great trust of customers.

Many customers associate the Amazon brand with low prices and high-quality products. This article will cover the Amazon value chain analysis in detail, including primary and support activities.  

Primary activities

Inbound logistics:

These logistics define the company activities that need to be performed to get the raw material. Amazon usually does not have its own products. It provides a platform to other businesses where they can sell their services and products.

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However, since Amazon does not manufacture its own products, the Fulfilment by Amazon is its inbound logistics. This service is available for the vendors. Amazon stands in the limelight because of the logistics, services, and returns it provide to customers. 

By using fulfillment by Amazon, sellers can store their inventory at the Amazon fulfillment centers. In this case, Amazon takes full responsibility for the logistics, product returns, and services.

The use of this service is an optional service for every seller, and it makes the item of third-party seller suitable for Amazon prime free shipping, two-day shipping, and others. The efficient infrastructure of Amazon gives it a competitive edge over many other companies in the same business. 

Amazon operations:

Operations include all the activities that are involved in converting the raw material into end products.

Amazon organizes its operations into three segments. 

  1. First, the North America segment, which contributes greatly to its revenues. It contains prominent brands like Amazon.ca, Amazon.com, Amazon.com.mx. This segment is most profitable comparatively.
  2. Second is the international segment which contains its operations outside the North America segment. By using this division, the company focus on international customers. It is Amazon’s second-largest revenue-generating segment. Several countries like Germany, Sweden, Australia, India, Japan, and many more are included in this segment. 
  3. The last segment is Amazon Web Services (AWS). It includes services like storage, database, computing, cloud infrastructure, and others. By using this segment company offer other services. The AWS segment enables the company to provide services outside its core activities.

Robust and innovative solutions add worth to Amazon’s profile. Cloud computing, AWS, and Cloud storage started in-house solutions for the company itself. So, the operation provides a competitive edge to the company. 

Outbound logistics:  

Outbound logistics involve activities in moving, storing, and distributing the finished products. Different operations are included in Amazon’s outbound logistics.

Amazon contains fulfillment centers that utilize robotic technology for inventory. This includes picking, storing, shipping, and managing products. Amazon contains almost 175 fulfillment centers around the world.

Along with outbound logistics, the company also uses some other resources like outsourced and co-sourced arrangements. Likewise, the company uses digital delivery services for online items like media, books, and others.

The company also contains several physical stores worldwide, which aids greatly in company revenue. Amazon usually relies on overnight delivery services like FedEx, TNT, and UPS.

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However, the company is investing day and night in its own logistics system. Its logistic system includes the increasing number of ships, trains, trucks, vans, and planes. The company has also announced Amazon prime air and Amazon Flex.  

Marketing and sales: 

Marketing and sales contain operations that are involved in advertising the products and selling them. The company has been investing in the area steadily for the past few years.

The company sustained almost 13 billion USD in advertising expenses in 2018. However, the company increased its advertising expenses to 5 billion USD in 2019, investing almost 18 billion USD during the year, almost an increase of almost 37%.

The company has always believed in advertising its products through promotional advertisements for certain products or as a whole. As the company provides several products and services, so it stands above its competitors. Sales and marketing is the main source of value for the company.

Amazon promotes its superior customer services, attractive prices, services, fast delivery, and products. Likewise, the company also contains Amazon Prime services which is an enhanced version of these services.

Amazon makes use of various marketing mix strategies to deliver its messages to targeted customers. 

Services:

Value chain analysis of Amazon shows that services provided by this company play a highly crucial role in achieving a competitive advantage. It provides standard services for the end-users and vendors, which makes its business model sleek and stable. It provides full support that includes support facilities for vendors, training, and literature. For sellers, Amazon provides various programs, tutorials, and tools to help them achieve better results.

After-sale services are also available for the customers, like returns. The whole process makes sure that customers get the best services. Amazon customer services are highly ranked services worldwide. Its customer services are irreplaceable. 

Support Activities

Firm Infrastructure: 

Amazon is a famous name in the business field, which they have made possible with the strong and effective firm infrastructure. Amazon has invested time and effort greatly in developing a reliable and scalable business model.

It includes offline structures like hiring, delivery, and shipping. At the same time, online support and digital solutions are no less than the best.

Amazon marketplace has two types of customers: sellers and buyers. For sellers, amazon provides a selling coach program “alerting sellers about opportunities for not going out of stock.”, sharp prices to stay competitive, and adding selection that is selling.

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This cloud computing and e-commerce company topped the customer satisfaction rating of the UK customer satisfaction index (UKCSI) in 2018 by the Institute of Customer service.

Human resource management:

Human resources involve activities that a company performs to manage its human resources. Amazon contains a great and best working environment for employees.

It provides the best services and training to its employees. Amazon employee management process and recruitment are some of the key elements for the success of the company.

Amazon also uses temporary personnel to modify its workforce seasonally. The company contains specific policies for promoting the employees. Amazon considers its relationship with the customers highly significant.

Procurement:

The procedure behind Amazon procurement is Sales and operations. By using this procedure, the company estimates the sales for every product in its distribution center inventory. The company also keeps track of its inventory position based on shipments and receipts.  

Once the inventory reaches a specific level, the company contacts the suppliers. The company uses its prediction strategy to find out which inventory will get out of stock soon. By doing so, the company makes sure that it does not get out of stock. 

Technology development:

Technology development involves the utilization of technology to perform a company’s operations. No one of us should have a doubt about the technological innovation of Amazon.

This is because it is one of the important factors that make the company stand above the competitors. The main source of technological development is its online retail stores and infrastructure. The company has also expanded into other markets using technology.

Like company has expanded its business into Cloud computing through its AWS services. Moreover, the company is also working in the artificial intelligence market. Amazon uses technology to perform its various operations and has achieved a good competitive advantage through it.  

Conclusion:

Amazon is the world’s largest retail store that contains both physical and online retail shops. This company also provides services in other technology-related markets. Amazon’s products and services are famous worldwide among thousands of customers.

Amazon’s value chain analysis clearly shows that customer is the most prominent character in the market. So, just like Amazon, every other organization should try to focus on customer satisfaction services.

Marketing sales and automation are the keys to success in any business. Furthermore, the properly organized delivery and service channels open the doors to generating more revenue.

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