Caso Amazon

International Journal of e-Business Strategy Management November/December 2002 • 153

CASE STUDY

Introduction

Since the mid 1990’s there has been a huge

increase in the amount of business transacted

over the Internet. Although the USA leads the

way in this area the use of the Internet in business

has become a global phenomenon. E-commerce,

as it has become known, has the potential

for creating wealth and changing the business

landscape. However, in order to exploit the

opportunities presented by the application of

technology it is necessary to create business

models suited to gaining and sustaining competitive

advantage in the new business environment.

One industry at the forefront of exploiting new

technology has been bookselling with

Amazon.com being the standard bearer for

online bookselling on a global scale.

Electronic commerce refers to trading electronically.

Transactions involve buying and selling

products, services and information over a network(

14). E- commerce is changing the way businesses

operate and is creating opportunities for

developing new markets and products. One of

the most important characteristics of the Internet

is the ubiquity of information and the ease of

access to that information. It is, therefore, little

surprise that information driven industries have

been at the forefront of developing and exploiting

the advantages of e-commerce. Bookselling is

one such industry. New technology has altered

the way booksellers operate and has been the

catalyst for change in the industry. Once thought

of as moribund and inefficient the bookselling

industry has grasped the opportunities presented

by new technology to create competitive advantages

and compete in a crowded market for

leisure and information products. Amazon have

been most prominent in the online bookselling

industry. As first mover in the market it is apposite

that much of the following investigation focuses

on the strategy and business model of the company.

The Management of E-Commerce Strategies for

Sustaining Competitive Advantage in the Online

Bookselling Industry: The Case of Amazon.com

Abstract: Many industry sectors have adopted the Internet as a medium of communications between suppliers and customers.

Yet few have been able to create, let alone sustain, a competitive advantage using e-commerce as a basis for

transacting business. The bookselling industry has been at the forefront of developing business models to seek competitive

advantage via Internet applications. Amazon.com were the first movers in this new method of transacting business

and were able to build a significant lead in the market. However, since 2000 the company has had to re-assess its

operations after seeing its competitive advantage eroded by a combination of debt financing and an increasingly coherent

response from rivals. This paper investigates the management of e-commerce strategies and the efficacy of the business

model developed by Amazon.com and calls on theoretical positions from the fields of strategic management and

economics to critically assess the sustainability of the company’s competitive advantage.

Received: September 2002

Dr Colin Combe, Caledonian Business School, Glasgow Caledonian University, Cowcaddens Road, Glasgow G4 0BA, UK

Tel: +44 (0) 141 331 8811, Fax: +44 (0) 141 331 3269, Email: C.Combe@gcal.ac.uk

Keywords: Bookselling, Online strategies, Management, Competitive E-commerce, Business

advantage,

ä

E-commerce provides a mechanism for creating

new wealth through entrepreneurship and

innovative business ventures. In many industries,

including that of bookselling, this new method of

transacting business has altered the competitive

environment. This phenomenon has attracted the

attention of scholars in economics and strategic

management. Indeed, there is a strong link

between the two streams of academic research

in analysing e-commerce. However, the available

literature on the theme of evaluating online business

models using economic and strategic management

theory remains relatively sparse.

The online bookselling industry has gained in

profile since the exceptional rise of the industry

standard bearer in the form of Amazon. Despite

receiving significant attention from both the academic

and non-academic press, the literature to

date has failed to fully articulate the key issues

relating to this phenomenon. This paper attempts

to fill the gap by using theory to link the unique

features of virtual markets with the business

model developed by Amazon.com to create and

sustain competitive advantage. In particular, the

investigation uses an e-commerce business

model forwarded by Timmers(13) as a parameter

for analysis and relies on economic theory of

industrial organisation(10) in assessing the sustainability

of competitive advantage. Firstly, it is necessary

to set the scene for analysis by assessing

the academic contribution to understanding the

value-adding activities of electronic bookselling

and the competitive advantages that can be

accrued through developing e-commerce as a

business activity.

Literature review

The impact of the Internet on strategic management

has been manifest. The potential benefits of

applying the Internet for business purposes is

extensive in light of the global diffusion of the technology,

the low cost of usage and the ability it

affords for reaching many millions of people

through connectivity and interactivity. The innovation

of the Internet provides a vehicle for entrepreneurs

to create new business ventures aimed at a

wide range of markets from specialist niche

through to mass consumerism. In business

processes firms achieve reduced overhead

expenses as the Internet facilitates pull-type supply

chain management. There are also opportunities

for customising products to particular customer

needs. Crucially, the Internet provides a

stimulus for firms to rethink their strategy in pursuit

of competitive advantage in their industry sector.

An important element in the discussion of the

application of the Internet in business is the analysis

of the value chain in the virtual trading environment

of e-commerce. The influence of the virtual

value chain is determined by the economics

of information as distinct from the economics of

physical products. Slater(11) notes that information

can be shared among communities of stakeholders

including suppliers, customers and firms.

However, unlike physical goods, it does not

diminish as it is used and therefore does not

adhere to conventional notions of supply and

demand dynamics. The cost of additional copies

of information declines as more is demanded, but

more crucially network externalities are created

whereby added value is not manifested in higher

prices(5). Network communities offer the advantage

of extended reach and range in collecting,

organising and analysing activities built around

the value chain(4).

Some key characteristics of virtual markets

can determine competitive advantage. These

have been identified and used as a basis for

154 • International Journal of e-Business Strategy Management November/December 2002

CASE STUDY

analysis by a number of contributors to the academic

attention afforded Internet research. These

include high connectivity, a focus on transactions,

the importance of information goods and network

and high reach and richness of information(

6). The efficiency of a virtual market is determined

by the number of people and products

that are within quick reach of online users and

that offer a cost saving. The quality and depth of

online content that is accrued, offered and

exchanged between market participants determines

the richness of the virtual market(1).

Although some barriers to reach are still evident,

such as language, taste and cross-border logistics,

virtual markets extend well beyond those of

traditional bricks and mortar firms.

The Internet provides a platform for virtual

communities to emerge and creates opportunities

for commercial interaction between firms

unfettered by traditional boundaries between

firms along the value chain. The availability of

information goods and the sheer ubiquity of that

information on the Internet reduces the need for

traditional intermediaries along the value chain.

This form of disintermediation can be the basis

for creating value and competitive advantage for

online firms. Concurrently, this process presents

opportunities for further value creation via reintermediation

where buyers and sellers are connected

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