Part 2: IT and Competitive Advantage

Information Systems and Competitive Business Strategies
Information system includes interrelated components that are used to collect data, process
and store it, and then distribute the resulting information to relevant parties. The information can
then be used to support decision-making. Since its foundation, Amazon has been adept at using
information system to improve the quality of services that it offers its customers and, therefore,
gain a competitive advantage over its rivals.
One of the information systems that Amazon uses to improve its competitive advantage is
the customer relation management (CRM) system. This system tracks and records information
about customers using their searches, wish lists, the orders that they make, and general data
mining (Smith & Linden, 2017). The company then uses this information to make
recommendations to customers any time that they visit the site. Due to the extensive data
collection on customers that the system makes, Amazon is able to provide the best possible item
recommendations for customers. Such kind of recommendations enhance the browsing
experience of customers and also improve their satisfaction.
The company also has smart analysis search (SAS) which tracks fraudsters. Fraud include
all false or illegal transactions that occur on the e-commerce website. By analyzing behavioral
patterns of the site’s visitors and users, the system is able to quickly to detect fraud and take
appropriate action (Smith & Linden, 2017). In so-doing, the company is able to improve the trust
that consumers have in it.
Analysis of Competitors: Part 1

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Porter’s Five Forces is a model that is used to analyze a company’s industry structure.
They are used to measure a market or industry’s profitability, attractiveness, and competition
intensity (Majed, Nuraddin & Hama, 2018). The five forces are competition in the industry,
potential of new entrants into the industry, power of suppliers, power of customers, and threat of
substitute products. Amazon faces strong competitors who have the potential of undercutting it.
Walmart and Kroger are the largest and second largest retailers in the U.S. respectively. They
both have strong brand names and adequate financial resources to take on Amazon. However,
their online business is still much weaker than Amazon’s.
With regards to Porter’s second force, potential for new entrants in the industry, the e-
commerce market is relatively easy to enter (Majed, Nuraddin & Hama, 2018). In fact, both
Walmart and Kroger have set up online sites to complement their offline stores. Despite the low
barriers to entry into online retail, Amazon holds a massive competitive advantage over both
Walmart and Kroger because of its superior customer service, brand recognition and loyalty, and
logistics and distribution.
As for bargaining power of suppliers, both Amazon and its two competitors, Walmart and
Kroger, have suppliers with a weak to moderate bargaining power. Granted, all the three retailers
need suppliers in order to remain in business. However, most of the products that they sell are
non-unique and, therefore, are supplied by many other suppliers (Majed, Nuraddin & Hama,
2018). This lowers the power of the suppliers over the retailers. Unlike suppliers who have
limited power over the retailers, customers have high bargaining power over the retailers because
of the large number of alternatives that they have (Majed, Nuraddin & Hama, 2018). Except for
groceries, in the case of Kroger, cheap products in the case of Walmart, and web services in the
case of Amazon, buyers have generally high bargaining power over the three retailers.

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Lastly, there is high threat of substitute for both Amazon and its two competitors. The
presence of a large number of online and offline retail stores means that customers have a large
of stores to shop from.
Analysis of Competitors: Part 2
Amazon’s strengths include strong brand name, reputation for being customer-centric,
and constant innovations, such as its use of drones to delivery products to customers (Gupta,
2020). Its other strengths include ability to sell products cheaply through efficient cost controls
and superior logistics and distribution system that allows it to deliver products to customers in a
manner that is fast, secure, and reliable (Gupta, 2020). Lastly, the company has a large collection
of merchandise which allow customers to make majority of their purchases on its site. As online
retailers, Walmart and Kroger do not have strong brand name such as Amazon’s. However, their
large number of offline retail stores give them a logistics and distribution system that can rival
that of Amazon. Additionally, Walmart and Kroger have large collection of merchandise just like
Amazon.
Amazon’s weaknesses include a business model that can easily be replicated and negative
publicity resulting from, among other things, tax avoidance controversies in countries, such as
the U.S., Europe, and Japan (Gupta, 2020). In today’s digital world, it is easy to develop an
online retail store. In fact, both Walmart and Kroger now have online stores in addition to their
offline stores. With regards to opportunities, Amazon can increase its revenues by expanding
into developing markets where its presence is not strong. It can also expand through making
more acquisitions. The latter strategy is already being used by both Walmart and Kroger who
have been an acquisition spree, especially online retail stores, in recent times.

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Amazon’s main weaknesses are government regulations which prevent it from
conducting businesses in critical markets, such as Iran and cybercrime. Walmart and Kroger also
face the first threat. However, with regard to the second threat, Amazon is more exposed than
Walmart and Kroger because, unlike the two which also have thriving offline retail stores,
Amazon is completely dependent on its online retail business.
Company Comparison
As competitors in the online retail market, the three companies have both strengths and
weaknesses. Amazon’s greater brand recognition, superior logistics, and large collection of
merchandise give it a competitive edge over Walmart and Kroger. However, Walmart and
Kroger also have advantages over Amazon. Unlike Amazon which is entirely an online retailer,
Walmart and Kroger have both online and offline stores. Therefore, they are able to satisfy
shopping needs of consumers of with different shopping behaviors. Additionally, they are less
exposed to threats that Amazon faces, such as cyber-attacks. Being completely online, Amazon
is more susceptible to cyber-attacks than Walmart and Kroger which have both online and offline
stores.
In comparing Amazon and the two companies, I found the SWOT analysis tool to be
more useful than Porter’s Five Forces. Porter’s Five Forces only provides an analysis of the
external environment of the companies. It does not provide for analysis of the company’s
internal structures which too have a major impact on the company’s ability to compete. SWOT
analysis, on the other hand, allows one to analyze both the internal and external environment of
the company.
Competitive Posture

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From Porter’s Five Forces and SWOT Analysis, it is clear that Amazon is in a strong
position as an online retailer in comparison to Walmart and Kroger. Granted, both are giant
offline retailers with a lot of resources at their disposal. Even though both have established an
online presence, their respective online businesses are yet to seriously threaten Amazon’s
position as the leading online retailer. This is mainly because of Amazon’s greater brand
recognition, superior logistics and distribution systems which allows it to deliver products to
customers in a fast and reliable manner, and a large collection of merchandise which allows
retailers to make most of their purchase on the giant online retailer’s store.

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References

Gupta, S. K. (2020, September 06). SWOT Analysis of Amazon. Retrieved from Business
Strategy Hub: https://bstrategyhub.com/swot-analysis-of-amazon-amazon-swot/
Majed, S. Z., Nuraddin, S. H., & Hama, S. V. S. (2018). Analyzing the amazon success
strategies. Journal of process management. New Technologies, 6(4), 65-69.
Smith, B., & Linden, G. (2017). Two decades of recommender systems at Amazon. com. Ieee
internet computing, 21(3), 12-18.