Amazon.Com’s European Distribution Strategy Essay

1660 Words May 4th, 2011 7 Pages

1. What are Amazon’s primary sources of competitive advantage? Analyze how they built their competitive capabilities over the years.

The following can be considered to be the primary sources of Amazon’s competitive advantage:

• Use of Internet: Amazon uses the internet as the sole method for selling goods to its consumers. Amazon’s competitors, such as Barnes and Noble, and Borders use brick and mortar as their main distribution channel. This method of using many store fronts is extremely costly. Thus, Amazon’s competitors are at a disadvantage because their costs are significantly higher than Amazon’s costs, allowing Amazon to sell the same goods at a lower price. • Amazon
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• The model was built on the fundamentals of saving costs right at the Amazon level rather than laying the burden on the customer side. The model was built using i2 Technology’s software which took into consideration a number of factors such as freight rates, labor costs, warehouse expenses, tax rates, leasing options for DC’s etc, which saved a huge amount of money for Amazon. • Drop shipments helped them remove a layer in the supply chain model and hence helped them achieve a shortened lead time to the customer. • Postal injection policy helped them to get rid of the delays that could occur in the conventional postal system and also helped them to deliver bulk orders in a city at one stroke.


• Although Amazon got a better price, the publisher system was inefficient and the lead times increased as the publishers took longer to get to the DC. • As a result, it suffered on inventory turns and hence obsolete product accumulation and revenue flow suffered. • Due to its “Deliver at any cost” policy, the DCs maintained a full array of products to be transported in a time efficient manner, but at the same time had to maintain redundant inventories at each DC which could prove to be harmful as demand at all DCs would vary and certain products just would not pick

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