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Introduction Of Digital Business Analysis: Amazon Assignment
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Digital business is a merging and effective business model in the contemporary world. The aim of this assignment is to discuss and establish a digital business in order to understand the concept of digital business and other key points related to this. Hence, key Trends of the digital business are analyzed in this writing along with the advantages. However, some issues are also there in the digital mode of business, which is the limitation of this business model. Besides, many types of collaborative relationships with other organizations and strategic alliances are included here. On the other hand, the role of digital currency and its application of it in the context of the chosen organization are stated.
Amazon, which is a well-established Digital business, founded by Zeff Bezos in 1994, is considered for this assignment (Amazon, 2022). This is a multinational and fully functional company, which works on e-commerce, cloud computing, artificial intelligence, and digital streaming. This is considered the world's largest retailer as well as a cloud computing company, which provides services through AWS. Besides, live streaming services like Twitch, amazon Prime are increasing the revenue and market share of the company (macrotrends.net, 2022). Besides, this company also introduces some consumer electronic devices like Fire TVs, kindle, and Alexa. In order to support the digital business, they have their logistic system through amazon Air, Amazon prime air, and Amazon flex (Amazon, 2022). The company is well reputed and its brand value is very high. Due to the advanced technology and effective business model the company is growing in North America as well as overseas.
Growth of Amazon in recent years
(Source: macrotrends.net, 2022)
In 2021, the overseas sales of the company increased 60% compared to previous years. Total sales of the company were $469.822 billion in 2021 compared, which is 21.7% more than the previous year (macrotrends.net, 2022).
1. Overview of key Trends and advantages
1.1: Definition of virtual business
Digital business is defined as the use of technology, which creates new value in the business. Besides, it supports the core operation of the business by inputting technology into customer service and internal capabilities. According to the experts Senyo, Liu, and Effah, (2019), there are several explanations for the digital business. Some industry experts say that virtual business is the creation of a new value chain and advantages, which cannot be gained through traditional business. Some digital businesses maintain their core operation with digital technology and some use that to induce growth and profit percentages (Aversa et al. 2021). Some industries use both factors for maintaining their business. There are three main elements present in the digital business. First, “use existing technology, embrace the concept and explore advanced business models” (Verhoef, and Bijmolt, 2019). Existing technology helps the company to provide a better customer experience, cut costs, and gather data in an easier way than a traditional business. Embracing the concept helps to get greater input while making. Exploiting new models of digital business aligns the focus with digital services.
1.2: Advantages of virtual business
The virtual business has many advantages, which cannot be enjoyed by the traditional business owner. First, the operational cost of running a digital business is very low. In order to run the digital company, the company did not need to set up many stores or offices in different places. Besides, the service or the product sold directly to the customer, needs very less staff to perform that. Hence, the company can save on the cost of establishing stores and employees (Aversa et al. 2021). Besides, as there is no need for physical stores to show the products, the cost of visual merchandising also did not require.
Second, the customer satisfaction rate in digital businesses is higher. As the customer can choose products, buy, pay, and return with the use of devices, it is easier for them to shop. According to the authors Senyo, Liu, and Effah, (2019), it is hassle-free and the customer can get the service or products from their home. Third, the maintenance of the operation becomes very easy. The use of AI, Computers helps the staff to perform work easily and the business operation becomes smooth and well planned.
1.3: Key Trend
As the digital business is emerging, some key trends have been seen in this business model. First, is the use of AI, RPA, and ML (Palmié et al. 2022). All digital companies have structured and unstructured data. The role of analytics is to process those data by using an algorithm to identify patterns and provide useful business information. Various operations of the business can be performed automatically with the help of those analytics. Besides, the use of no code and low code tools is becoming very common in the virtual business. This system allows the employee to build an app with the use of some common building blocks. Controlled access to the APIs and data is mandatory in this case. According to the researchers Aversa et al. (2021), many studies said that within 2025, 70% of the company will use “no code or low code” tools for application development.
1.4: Application of key trends and advantages on Amazon
As one of the biggest digital Giants, amazon has successfully implemented many key trends in the digital business. Such as “Amazon Alexa” has developed with the use of analytics like AI, ML, and RPA (geeksforgeeks.org, 2022). Besides, for the consumer-focused application and in the treasury RPA has been implemented in overall platforms. In terms of no code toll, amazon can be considered a latecomer. However, now they are successfully working on the use of no-code tools and gaining the advantages of the digital business.
2. Key Issues and Ethics in emerging Digital business model
2.1: Discussion of the new emerging business models
Various emerging business models are identified in the field of digital business. As the competition is becoming higher in the digital business, market experts introduce various new models.
Marketplace model: This model suggests the use of any digital marketplace, which can connect the buyer and seller. A common platform is created where access is given to both seller and buyer to initiate business (Angeloni, and Rossi, 2021). In this business model, finance is caret through fixed transaction costs or brokerage fees. Besides, companies also charge a membership fee, positioning, and advertising services. Hence, this is also considered a disruptive model for the other traditional industry.
Subscription model: in this digital business model, the company provides the service or production based on subscription fees. According to Adler Berg (2022), in this business model, customers are charged periodically such as annually or monthly for the service they are getting from the company. The objective of this model is to create a long-term commitment between the company and the customer. This model is very efficient because it allows the business to grow at a constant rate.
Ecosystem models: This model is very popular to bind the customer for long terms. The company creates a “lock-in” process. Such as when a customer bought a phone from a company, the hardware or software is compatible with the same system (Aversai et al. 2021). This makes the change difficult and the customer sticks to the system.
2.2: Key Issues
Though digital business is emerging rapidly, it has many barriers and limitations to overcome. As stated by Toniolo et al. (2020), one of the top challenges in the digital business is the maintenance of “cyber security”. In digital business, all the data, identity, and assets are kept in digital space. Hence, they become easy targets for hackers. Unauthorized access to those data and assets can cause huge damage to the company, which includes financial loss, reputational loss, and legal penalties (Park et al. 2021). Hence, in order to prevent a malicious attack, the company needs to invest more budgets in protection.
Digital companies store the personal data of the consumer. In some cases, company misuses those data and sells the confidential data to any third parties. According to Adler Berg (2022), misinformation and polarization are seen in order to increase the reach to the customer. As the competition is growing rapidly in the digital platform, the company needs to focus on innovations. However, a lack of skilled and advanced employees is a common challenge in the company (Toniolo et al. 2020). As innovation in the global market is happening rapidly, it is hard to maintain the same pace.
2.3: Application of business model in Amazon
Amazon as a successful digital company uses some of the above models that are described. An important segment of amazon is retail, where they connect the buyer and seller through their website "amazon.com" (garyfox. co, 2022). This access can be gained by using the application also, which is available for Android, Microsoft, and iOS (Amazon.2022). Amazon works as a broker and earns through commission. The online delivery of the product is also controlled by amazon logistics. Hence, they have used the "Marketplace model" very successfully in the business.
Business model of amazon
(Source: garyfox.co, 2022)
Amazon has also incorporated the “subscription model" in the business through amazon prime, audible, amazon music, and others. Movies, songs, podcasts, and books are available on this application of amazon where they charge an amount periodically in order to use that application (garyfox. co, 2022). Besides, Kindle Unlimited is also present for book lovers. In the case of the "ecosystem model", this has not been fully developed until now. The company likes to be the intermediary in every transaction. Though they have some devices such as Alexa, fire TV, and tablet, more innovative products are needed (Amazon.2022). It will help to create the "lock-in" with the customer.
3. Collaborative relationship and strategic alliance
3.1: Discussion on strategic alliance and Collaborative relationship
This is defined as the arrangement between two companies in order to achieve some specific objectives. In some cases, the company undertakes a project, which is mutually beneficial for both of them. As stated by Sun, Sun, and Liu, (2022), there are three main categories of strategic alliance; those are “Non–Equity Strategic Alliance”, “Joint Venture”, and “Equity Strategic Alliance”. The process of conducting the alliance varies based on the objectives of the organization. Such as development of service and product, customer service, entry into a new market, and others. The relationship may be formal, informal, long-term, and short-term as per the need. There is not much difference between a collaborative relationship and an alliance (He et al. 2021). However, the alliance can be considered a special collaboration. Besides, as per the objective of the company one or more collaborations can happen with the same company, which is known as an alliance.
3.2: Advantages and disadvantages
There are many advantages and disadvantages of the alliance and coalition. The benefit of the alliance is the completion of the objectives of both companies. According to the author Mohebimanesh et al. (2021), a win-win situation is created through the alliance where both companies benefit from each other. Besides, fulfilling the gap is also possible through the alliance. Such as one company is good at marketing and another one is good at product development. Collaboration between them can improve the marketing and product line for both of them. This is also helpful to avoid some legal barriers in the business (?irjevskis, 2021). Such as when a company wants to conduct business overseas, collaboration with a local company in that country makes the process less complicated and helps to avoid legal barriers.
Alliance and collaboration have their disadvantages. Conflicts are one of them. As described by Mohebimanesh et al. (2021), though the roles, objectives, formalities, and deliverables also are mentioned in the contract, there is a difference between companies in how they conduct their business. Besides, various “confidential information’s” such as customer data, financial information, future strategies needs to be shared with each other, which is a question of trust. In addition, for the long-term alliance, the companies become dependent on each other and lose their individuality (He et al. 2021). At the time of making a decision, both the company has to agree or involve. This makes the process more complicated and each organization starts to lose control over their business.
3.3: Application in the chosen organization
In order to improve the business and gain competitive advantages Amazon also uses different alliance strategies with other organizations. Companies are moving deep into financial services to make the payment process easier for the customer. In that aspect, amazon created collaboration with "Goldman Sachs" (macrotrends.net, 2022). This is a financial organization, which is going to offer small business lots to the US custom by collaborating with amazon. Amazon was also looking for a marketplace in order to lend finance to its merchant. Hence, the collaboration meets the objective of both.
Other collaboration is done with "Kohl's". These two companies have the same objectives of providing better and improved customer service. Hence, the combination is created with the reach and customer loyalty of Amazon and omnichannel capabilities and a high number of stores of "Kohl's" (garyfox. co, 2022). Due to the partnership, Kohl's started to accept amazon returns, which increased the traffic in the store, and the customer service Amazon improved.
4. Impacts of digital currency
4.1: Importance of digital currency in digital business
Digital currency is a virtual form of money, which does not have any physical existence. However, they can be used as an exchange for money. As stated by authors like Marple, (2021), currently the most popular digital currency is a Crypto currency like Bit coin. However, many national governments and their head financial bodies are also working on the development of a new digital currency. Now the question is how digital currency can help the digital business to grow. In digital business, most of the payment is done through digital transactions (Tan, and Xue, 2021). Using digital currency for payment is helpful as the transaction fees are lower for digital currency. Hence, by using digital currencies like bit coin, block chain, or others the business have to pay fewer fees. As a result, business can save a lot of money. Besides, the speed of processing the fees through digital currency is higher. Hence, the business does not have to wait for days to get the fund in the bank in case of international transactions (Marple, 2021). Especially for digital MNCs like Amazon, where they have clients from all over the world, this feature is important.
Another problem in business is inflation, which increases operational costs. According to Tan, and Xue, (2021), in digital currency there is no inflation because of the algorithm and controlled limit of quantity. Hence, managing the finance with digital currently will reduce the operational cost of the company. Besides, digital businesses have loads of data about the credit and debit cards of customers. In case of a cyber-attack, there is a risk of losing confidential data, which can cause legal issues like data breaches (Marple, 2021). Using digital currency reduces that risk and increases the trust of the customer. On the contrary, digital currency is easier to pay, especially for international transactions. When a digital company incorporates a payment system with digital currency, there are higher chances of increasing the customer base in the global market. Hence, more opportunities will be created for revenue generation.
4.2: Impacts of the Recent Crash of digital currency on digital business
Digital currency is very volatile as its price of it rises and falls very quickly. This currency has only been around for a very short time, and the price discovery phase is still growing (techmonitor.ai, 2022). Hence, the risk of difficulties will be there until the price stabilizes. However, in recent times a big crash is seen in digital currency, which has had some major impacts on digital businesses like Amazon. According to Mark, (2022), Amazon has initiated its own digital currency called DyDx for the transaction. Due to the crash in decentralized currency, the company can face some major fallback and financial loss. However, it is possible that customers will use other digital currencies as well in the future in order to purchase services or products from amazon. When the market is volatile, the company becomes helpless, as there is no specific regulation.
The dramatic crash in crypto wiped out around $2 trillion from the global market (techmonitor.ai, 2022). As the digital currency is volatile, there are high chances of a crash in the future as well. The digital business that accepted the transaction through digital currency had to face the loss. Some researchers stated that a crypto crash can bring a bigger recession in the market. Besides, as an investor in the business, there are some major risks (Mark, 2022). Such as when crypto is in a wallet, the business is not the owner. The reason for keeping the digital currency in the wallet is understood. The aim here is to create a financial system that can wipe out the power of the centralized system (techmonitor.ai, 2022). Hence, entrusting the fund with some third party is risky for digital businesses.
Conclusion
In this report, an analysis of a digital business is done. Amazon, which is a functional digital business, is chosen for the project. Along with time, the acceptance of digitalization is increasing, which increases the growth of the company. Some of the key trends in digital business are AI, ML, no-code tools, and others. Amazon is able to use those key trends and get the benefits of digital business. However, there are certain risks associated with the digital business such as cyber-attack, ethics, and others. Some models of the digital business are analyzed here. Among them, amazon is successfully implementing the subscription and marketplace model. Collaboration and alliance are other important part of the digital business, which allow the company to fill gaps in the business and create synergy. In that aspect, Amazon also created collaborations with "Goldman Sachs ', "Kohl's" and others. Amazon also initiated its own digital currency called DYDX. However, the recent crash in the market was devastating for the business and investors.
Reference list
Journals
Adler Berg, F.S., 2022. The tension between podcasters and platforms: independent podcasters’ experiences of the paid subscription model. Creative Industries Journal, 15(1), pp.58-78.
Angeloni, S. and Rossi, C., 2021. An analytical model for comparing the profitability of competing online marketing channels: Search engine marketing versus e-commerce marketplace. Journal of Marketing Theory and Practice, 29(4), pp.534-549.
Aversa, P., Haefliger, S., Hueller, F. and Reza, D.G., 2021. Customer complementarity in the digital space: Exploring Amazon’s business model diversification. Long Range Planning, 54(5), p.101985.
?irjevskis, A., 2021. Exploring Critical Success Factors of Competence-Based Synergy in Strategic Alliances: The Renault–Nissan–Mitsubishi Strategic Alliance. Journal of Risk and Financial Management, 14(8), p.385.
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Magazine
Mark, E. (2022). The impact of the cryptocurrency crash on businesses. The global advisory and accounting network. Available at: https://www.hlb.global/the-impact-of-the-cryptocurrency-crash-on-businesses/#:~:text=Many%20of%20the%20financial%20institutions,the%20liabilities%20for%20their%20customers. [Accessed on: 20th September, 2022]
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macrotrends.net (2022). Amazon Revenue 2010-2022. Available at: https://www.macrotrends.net/stocks/charts/AMZN/amazon/revenue#:~:text=Amazon%20annual%20revenue%20for%202021,a%2037.62%25%20increase%20from%202019. [Accessed on: 20th September, 2022]
techmonitor.ai (2022). Has the crypto bubble burst?. Available at: https://techmonitor.ai/policy/digital-economy/has-the-crypto-bubble-burst[Accessed on: 20th September, 2022]
