The contemporary business environment is characterised by technological advancements. As economies and business tend to go to the cyberspace, there is also a compelling need to transform the business practices and functional areas to synchronise with the marketplace trends. According to O'Reilly (2005), Web 2.0 is a collective term that refers to the modern World Wide Web applications and techniques used to improve user interaction online. O’Reilly (2005) visualised Web 2.0 as a collection of computing principles and practices that link together a system of websites that exhibit some or all of those practices and principles, at different locations from that core. The strategic position of Web 2.0 is the web as a platform, and the Internet users have more control over their data through user generated content. Some of the core competencies of Web 2.0 include cost effective scalability, software as a service, architecture of user participation, software above the level of a single device and harnessing collection of intelligence (O'Reilly, 2005). This paper outlines how Amazon Corporation has strategically leveraged Web 2.0 techniques to become a leading player in internet retail shopping industry. This has been achieved through the five strategic steps of Web 2.0, which include: building a collective user value, activating network effects, working through social networks, dynamically syndicate competence, and recombining innovations.
Amazon.com, Inc. is a global company that offers internet retail shopping services. It was started by Jeffrey P. Bezos in July 1994 (Amazon, 2013). The company itself is a low-cost retailer and offers a wide range of products and services, which is unique in the internet retail business. Between 2009 and early 2013, Amazon had rolled out a global strategy, which was about global dominance through the development and use of technology, and alliances to offer an increasing range of products and services. The strategy also entailed increasing customer experience. Mckeown (2012) argues that operational effectiveness alone cannot achieve a sustainable competitive advantage.
Building on Collective User Value
Consumers use Amazon website to shop online, share user experience and be exposed to promotional offers. When potential customers visit the website and sign up, they are immediately gratified and are instantaneously able to use the website to its full functionality. Amazon developers and business managers use data mining and business analytic tools to harvest the data generated by users, as well as search engines to improve the platform and customer experience (Miller, 2004). This is an example of harnessing collection of business and competitive intelligence. Amazon’s website architectural design is geared to direct traffic to its site through search engine optimisation.
Customers contribute value to the platform when they refer the websites to businesses and friends (Oz, 2009). This is achieved through sharing information with their links in social networking sites about its location and what is worth doing or purchasing. Notably, these functions are Amazon’s core competencies and the reason why many customers use the platform. Business partners also generate digital content when they create an ad banner and reviews to promote their products or services. Amazon has designed its platform using Web 2.0 techniques in a way that personal users and business partners can use the platform to meet their own objectives. This has consequently increased the value of the platform through content creation. Moreover, extensive investment in R&D enabled the company to come up with new ideas of improving the customer experience (Amazon, 2013).
Technology also saved the company’s need to segment its market upon conventional approaches such as human behaviour and demographics (Pride & Ferrell, 2007). Embracing a model where content is generated by users, especially through feedbacks and search engines, Amazon has been able to cut cost linked to traditional application development. The savings are a result of reduced expenses incurred in content development and scalable business practices.
Web 2.0 strategy focuses on the content generated by users. This content is used by marketers to mine customer behaviour or patterns that can be translated to competitive intelligence. Without the user, Amazon would lose its competitive advantage, and its online marketers would have no virtual market to advertise to. In summary, Amazon’s market capitalisation of $120.0 billion is subject to its user base (CNN, 2013).
Activate Network Effects
Amazon’s success has been attributed to its ability to activate the network effect. As outlined in the above step, the corporation’s value is associated with the number of its base customers. In addition, its products and services considerably improve with the growth in the customer base. Amazon captures the network effect whenever a potential customer visits or uses the platform to share information or communicate promotions. In the effort to optimise the positive impact of networking, Amazon has strategically integrated various Web 2.0 techniques within the platform. This includes Flash, Ajax, XML Web Services, Google Maps, RSS feeds, like tagging, social bookmarks or networks such as Twitter and Facebook (O'Reilly, 2005). By capturing either the explicit or implicit content generated by users, Amazon’s platform is regularly improved. Amazon offers its partners an open API (Application Programming Interface) to develop new content towards its goals.
Such practices improve the value of the platform, and through research and development of new Web 2.0 applications Amazon can create new concepts that may be implemented in the future. The company also expanded its Global App distribution to approximately 200 countries among them Vatican City, Brazil, South Korea, Mexico, Australia and Papua New Guinea (Amazon, 2013).
Furthermore, Amazon enables users to identify and refer to friends on social networking sites. This is an instance of the network effect where a customer’s decision may directly influence other potential customers. Amazon’s organisational culture focuses on customer satisfaction and technology for innovation. Therefore, it emphasises on the application of the Web 2.0 techniques. Research also indicates that the platform with a larger and stable customer base eventually has the better products and services (Oz, 2009). Consequently, it is critical for Amazon to improve its market share. Additionally, as the company increases its customer base, it will be in a position to serve the long tail as a result of the more relevant content generated. To summarise, Amazon identified the correlation between the number of users and customer satisfaction, which is linked to the quality of their products and services. Through effective implementation of the network effect, the company has strongly positioned itself in the future by satisfying a broad range of customers.
Work through Social Networks
Web 2.0 strategy has enabled Amazon to create, build, deepen and attract relationships with its stakeholders. This is demonstrated internally with employees, and externally with partners, investors, customers and potential customers. The company identified the potential of social networks in attracting and sustaining relationships with customers. Marketing managers could reach mass audience, target markets and create better customer experience economically. As of May 2013, Amazon served four distinct customer groups, which included consumer customers, seller customers, developer customers and enterprises (Amazon, 2013). The Human resource department could also train and educate its staff efficiently through Wikis and collaborative tools.
Amazon has been using viral marketing efforts, which have been of significant help to the firm because of the structure of the platform. Amazon’s platform functionalities enable users to actively engage with or without extensive internet usage background. All level internet users are able to be rewarded for visiting the site. In turn, they are encouraged to frequently access and refer their friend. The platforms architectural design meets most of the Web 2.0 viral distribution requirements, which is unique. Amazon embraces mobile technologies that are relevant in the growing market of smart phones. This facilitates the Web 2.0 features which improves the customer experience. Additionally, the company designed a virtual salesperson and customer care representative based on the data mined from their websites. One of the outstanding products of R&D is the development of Kindle (CNN, 2013). Kindle is a wireless electronic reading device. It also facilitates the download of magazines, books and newspapers. These factors consolidate the effect of viral distribution in social networks. By targeting various people who are more likely to be satisfied, they consequently contribute to the network effect. Amazon enjoys a large pool of connectors. More participants replicate a greater number of links to other friends or associations. Business partners and distributed locations play a role in advertising and sales promotions. In summary, Amazon’s has been engineered to catalyse socially triggered viral distribution of the brand.
Dynamically Syndicate Competence
Amazon is competent at developing marketing and mobile based device software. This is part of its competitive advantage. Currently they provide their customers with cloud based solutions with powerful marketing tools. Amazon’s Web Services (AWS) also gives the company an upper hand in the market. These include Amazon Elastic Compute Cloud (Amazon’s EC2), Public Data Sets, Amazon Cloud Front and Amazon Elastic Block Store (Amazon EBS) (Amazon, 2013). These services are web based and can be accessed through multiple devices. This is a pattern of software usability over multiple devices. It is crucial because it enables the Web 2.0 based applications by Amazon to be accessed from various devices. The company also combines internal and external competencies. This enables it to focus on its core functions. Amazon enjoys economies of scale, thus capable of managing some of its resources through outsourcing. Furthermore, the development along the API enhances the platforms quality, which is user centric. Business partners and third parties also dynamically strive to innovate their products to meet their customers’ requirements. Finally, Amazon values its employees hence motivating them to output their best (Gelinas, Dull, & Wheeler, 2012).
Amazon’s platform as a company has innovative attributes that links all the stakeholders for a shared vision. They achieve this by creating Application Programming Interfaces for developers and business partners. Business partners are strategic in ensuring the company’s market value is improved and sustained (Mckeown, 2012). The transparency, reliability and availability aspects of Amazon’s platform are beneficial for all the stakeholders. This is pattern of perpetual improvement. The company also encourages innovation and extensive R&D investments beyond the platform’s resources (Amazon, 2013). One of the paying approaches Amazon embraces is not to focus on its competitors’ Web applications and strategies. Instead, it emphasises on developing an infrastructure that would allow the company to collaborate with alliances, hence, evolving its platform to achieve the industry needs. This makes the platform more scalable, as demand grows, without straining the internal resources. Besides its platform innovation efforts, the company embraces computing technologies such as business intelligence, data mining and server virtualisation.
Web 2.0 strategies have considerably influenced the presence of Amazon in the internet retailing industry. Besides influencing the way the company markets its products and services as well as information processing, Web 2.0 has a profound impact on Amazon’s workplace. Web 2.0 has changed the way relationships or business links are forged online. The trend is manifested in technologies and concepts notably: shared content, XML syndication (Wikis and blogs), Client Side Technology (RIAs/AJAX), RSS feeds, user participation and social networks. Web 2.0 is here to stay, and companies embracing it must strive to keep their businesses safe and take advantage of the benefits. Overall, successful business operations over the Internet need a friendly Web 2.0 strategy in the corporate culture. This constitutes transparency, open communication, collaboration, innovation and user-generated content. These are the pillars of Amazon’s competitive advantage.