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Running head VALUE CHAIN ANALYSIS Value Chain Analysis Unit 4 Individual Project Assignment Richelle Cooper GB570 Managing the Value Chain Professor Dr Rita Gunzelman Kaplan University March 4 2014 VALUE CHAIN ANALYSIS 2 Value Chain Analysis The digital economy has emerged via the growth of globalization From this expansion ideas such as eCommerce electronic commerce and eBusiness electronic business have arose as the electronic substitute to the conventional way of conducting trade andor business During the past decades ecommerce has become more and more vital for organizations globally Today technology is growing at a rapid pace and organizations are forced to implement new technologies As organizations will need to modify their business strategies e commerce will play an important role The industry of ecommerce includes data service companies such as Yahoo Gmail and Google The industry of ecommerce also includes retail service companies such as eBay and Amazoncom Within this paper we will analyze the value chain of Amazoncom Based out of Seattle Washington Amazon ranks in the top 50 Fortune 100 companies In 1994 Jeff Bezos launched Amazoncom In 2000 merchants and vendors were offered Amazon s finest platform of e commerce Amazon currently operates worldwide in countries such as Germany France Canada Italy the United Kingdom and Spain The organization employs approximately 88000 employees globally approximately 2 million selling accounts 150 active consumer accounts and several external developers Amazoncom 2014 Amazoncom was the first online organization with a concentrated focus on online book selling Online book selling provides an organization with the ability to lessen handling warehousing and inventory expenses Online book selling has the ability to accommodate a vast market that is contained in a conventional bookstore With online book selling the organization is also able to offer convenient valueadded services with an enlarged selection at reduced prices Besides books today Amazon offers consumers other products such as jewelry VALUE CHAIN ANALYSIS 3 electronics clothing etc Amazoncom is dedicated to their consumers The organization has an operational team that operates and manages all activities comprised of the supply chain transportation fulfillment and especially customer service Amazon s focus is to ensure consumer expectation and promises are met daily worldwide Amazoncom 2014 When it comes to a consumerbased organization such as Amazon one of the most significant features when it comes to consumer satisfaction is the value chain Amazon s mission is to world s most consumer centric organization to assemble an area where consumers can purchase what they want online Investor Relations 2014 Amazon can safeguard a competitive advantage via the value chain and ensure consumers receive the best possible value The value chain has procedures that generate and increase value to raw materials Porter s value chain contains six method that include inbound logistics operations outbound logistics marketing sales and service Each method is validated via the organization s human resource management infrastructure and technological procurement and development UKEssays 2014 Demand Chain Analysis When an organization needs to make a decision regarding organizational precedence and growth the value chain comes into play The value chain connects directly to the development plan that the organization wants to follow and measures the capabilities of specific organizational strategies The combination of the supply and demand chain working collectively makes up the value chain The value chain is an outline for organizing the involvement of individual operations in an organization The principles of the value chain strengthen the evaluation of operations that enhance value and eventually lead an organization into a well constructed supply chain The demand chain yields a few procedures of the value chain such as sales and marketing and guarantees consumers will receive their desired product or service The demand VALUE CHAIN ANALYSIS 4 chain is a network of business procedures and events that assist firms in understanding managing and creating consumer demand Walters amp Rainbird 2007 Concerning Amazon the organization has a demand chain that ensures consumers receive their requested products The following sections will provide a more indepth overview of Amazon s demand chain Identi cation of Customer Market Wants and Needs Online shoppers are Amazon s target market Amazon is extremely focused on delivering value to their customers with a concentrated focus on informative products enhanced product diversity reduced prices and an increased level of customization Amazon is able to aim at a fast growing market The organization selects new ways to attract additional customers while providing consumer friendly customer value that leads to the achievement of a competitive advantage With a concentration on these strategies Amazon is capable of attaining a competitive edge in marketplace operations Amazon s core values are their sound focus on selection service price and convenience With a solid focus on technology and innovation Amazoncom is able to improve the online shopping experience Venkatesh 2011 Market Opportunity Analysis A market opportunity analysis is a verified marketing and benchmarking tool to determine probability and desirability of success in a rising market and will assist in brand ROI improvement Ethridge nd Because Amazoncom is an online business the organization is continuously seeking innovative technologies in order to assure consumer needs are met Amazon s innovative technologies allows the organization to employ an operative consumer relationship management by tracing consumer purchasing behaviors and allows for recommendations of like merchandise that a consumer may wish to purchase via user recognition The user recognition purpose aids consumers in their purchasing decisions as well VALUE CHAIN ANALYSIS 5 as raises the amount of uporcross purchasing which enlarges the organization s total profitability Anders 2013 Amazon has contact with a vast network of distributor and suppliers Though Amazoncom maintains a number of storage centers the bulk of their merchandise is based upon time deliverable contracts by way of external manufacturers In addition the shipping and distributing of merchandise is performed via external contractors making Amazon s overhead costs low and provides the organization an advantage cost over conventional sellers Identi cation and Analysis of Value Drivers Value drivers are objects that improve the value of service or merchandise by increasing the products perception and fundamentally offering a competitive advantage innance 2009 The difference between Amazon and their competitor s it Amazon s IT system which satisfies the tasks of all consumer relationship management essential functions Through Amazon s easy touse website the organization accomplished an increase in sales gained enormous popularity and proclaimed meaningful role of ecommerce in the United States Aside from information technology several of the main value drivers of an organization consist of the organizations distribution consumers and supply chain Value Proposition Value proposition is very parallel to value drivers It is the value that is supplied to consumers via products and service Consumers will pay a price that they believe is fair The value proposition draws the marketing out of the value chain and the value of the merchandise and shows consumers their products or services are valued more over other organizations The value proposition begins with making sure the organization knows their target market and how to satisfy them Next it ensures the organization is offering quality products or services at fair VALUE CHAIN ANALYSIS 6 prices To create value proposition Amazon focused on the framework of community content connectivity convenience communication customization and customer care Value Proposition as related to Demand Chain Amazon strongly focuses on creativity and innovation to improve the value of their products or services to provide consumers with the best Amazon offers a range of product options which adds value to the organization to certify consumers are making purchases that satisfy their wants and needs Amazoncom also associates its value proposition to their demand chain by guaranteeing their mobile application is working properly and always uptodate Providing consumers with the simplicity of using the application adds to the demand chain value as consumer are more keen to make purchases Value Proposition as related to Supply Chain When looking at value proposition just as the demand chain the supply chain holds the same importance This creates consumer value although it may not be noticed By controlling their inventory Amazon has gained tremendous value proposition for their supply chain Amazon focuses strongly on marketing inbound and outbound logistics and its supply chain which allows the organization to deliver products to consumers in a timely fashion Amazoncom also has a strong IT marketing and customer service system that supports their supply chain Supply Chain Analysis Supply chain management connects all supply related organizations in a combined two way communication system to administer high quality inventory in the most proficient and effective ways to deliver value to consumers Amazoncom has a very modern supply chain that contains various stages Amazon s supply chain is comprised of inventory planning inbound VALUE CHAIN ANALYSIS 7 and outbound shipping transportation management demand forecasts and warehouse management Supply chain management is a comprehensive function and all related departments and departmental functions need to be performed efficiently Internal and external shareholders make up the supply chain It is important that both shareholders work resourcefully The presence of suppliers and supply chain management in the supply chain analysis results in effective performances as the proficiency among the different shareholders would expand increase the ability to comprehend the capabilities and needs of one another along with the capability of solving challenges Value Production and Coordination Production is a significant measure in the supply chain process as it can enhance the supply chain value In the value production and coordination process an organization works with suppliers and consumers via marketing information technology logistics and distribution Organizations have the ability to produce extreme value to consumers through a wellbuilt focus on various characteristics of the value coordination The cost of manufacturing products can be very costly and decrease value In terms of the value of Amazon s supply chain coordination has exhibited a great impact Amazoncom can increase the value of their coordination and production by certifying that the items listed for sell are readily available Providing the best quality at the lowest prices betters consumer value Value Delivery For an organization that is Internet based deliver is extremely imperative Amazoncom strongly focuses on delivery by delivering value to their consumers using inbound and outbound logistics Minus delivery consumer value would not occur If consumer merchandise was not delivered during the guaranteed time frame consumer value would decrease tremendously In VALUE CHAIN ANALYSIS 8 addition to product delivery customer service is another form of delivery Amazoncom is devoted to making sure their consumers receive the best customer service at all times Value Servicing The process of delivering value via employees is value servicing Amazon offers service to their consumers by way the contact us feature on their website as well as internal and external operated contact centers These attributes allow consumers the ability to carry out a range of numerous functions which entails estimated delivery date reviews order and shipment tracking and order cancellations When consumer inquiries cannot be resolved via Amazon s website customer service representatives are available 24 hours via phone andor email The best way to create and spread value to consumers is through customer service In 2011 Amazoncom obtained the Customer Choice Award for customer service holding the top position Via the new technology of text and emails as a form of communication so that consumers can contact Amazon employees any time has added value to the Amazon brand Goodfellow 2012 Enterprise Value An organization s total value and business worth is enterprise value Enterprise value is the sum of net debt capital leases preferred stock noncontrolling interest and equity value Enterprise value is a form of viewing an organization s worth should it be sold Equity value or market capitalization is the organizational value available to vendors or stockholders An organization s total debt minus cash and cash equivalents equals net debt Capital leases are the elements recorded on the balance sheet at assets and payments that are recorded as debts Preferred stock is an economic liability that is equivalent to is liquidation value and contained within net debt Noncontrolling interest is a fraction of a secondary organization s stock that is not maintained by the parent organization VALUE CHAIN ANALYSIS 9 Amazoncom was one of the first online stores to sell products and services to consumers This is Amazon s principal source of income In 2013 Amazon generated sales was 7445 billion 6109 billion in 2012 and 4808 billion in 2011 Market Watch 2014 It is safe to say that Amazon s product revenue is continuing to thrive Over the past several years Amazoncom has acquired organizations such as Zapposcom Quidsi and Touchco In 2007 the US was introduced to Amazon s Kindle Kindle is Amazon s wireless portable ereader that allows consumers to download music books movies etc Industry Drivers Industry drivers are one of several factors that can affect an organization These factors can be economical factors marketing factors competitive factors andor environmental factors As one of the major forerunners of the global economy ecommerce has transformed the development of the global business improving the effectiveness of logistics and simplifying the acquisition the promotion and sale of goods Ecommerce has assisted millions of consumers via lower prices high standard competition timely order processing and timely shipping Industries of all sizes rely on ecommerce applications in order to endure and take part in local national and global economies By offering inexpensive quality products and fast service to consumers is what powers the competition in the ecommerce industry Amazoncom is able to contend with other organizations utilizing these industry drives to ensure they do not fail Competitive Advantage Competitive advantage is extremely imperative The value chain supply chain and the demand chain all play a vital role in competitive advantage A competitive advantage is when an organization can exceed consumer expectations over their competitors Amazon s competitors consist of eB aycom Overstockcom WalMartcom and other organizations with an online VALUE CHAIN ANALYSIS 10 website who offer the same products Brand loyalty is another factor which leads to competitive advantage Amazoncom has millions of consumers who are loyal to their brand In order to obtain a competitive advantage in the ecommerce market Amazon concentrated on diversification by selling distinctive online products Amazoncom also concentrated on partnering with distinct virtual organization to display and sell their merchandise through Amazon Amazon s introduction of their Kindle Fire shook the division of technology out of Apple Inc Amazoncom has slowly pierced the industry of book selling via better innovative ideas consistently collaborating with cloud space and technology to supply the utmost consumer value Customer Delight Customer delight is when organizations exceeds consumer expectations and surprise the consumer with an experience of positivity Consumers are the focus of any organization therefore it should be the organizations main objective to be devoted to providing and serving consumers to the best of their abilities Hanselman tells us there are six strategic constituents to customer delight These constituents include the wow factor constructing spontaneity recognizing and comprehending the consumer ensuring the consumer feels valued by the organization showing their gratitude and making sure consumers realize how important their business is furnishing genuine service and word of mouth advertising Customer delight is something consumers can feel remember talk about and then come back for more Hanselman 2011 Amazoncom offers a purchasing comfort to consumers through a variety of online products With a strong concentration on technology and innovation Amazoncom has enhanced the shopping experience for their target consumers Amazoncom provides consumers with a VALUE CHAIN ANALYSIS 1 1 service that is unexpected Amazon offers personal accounts and consumer satisfaction that ensures the consumers feel gratitude that is genuine and know they are valued Conclusion The value chain is exceptionally vital to any organization The supply and demand chain working together creates the value chain Value proposition and enterprise value are key measures in confirming that the total value of any organization is completely understood With the improvement of technological advancement and enhancing globalization the demand for online business has considerably increased Amazoncom has proven the organization has an effective value chain that confirms their consumers are receiving the best value possible Through continuing to improve and work on plans of increasing their value chain Amazoncom can continue to be the top rated online retailer for years to come VALUE CHAIN ANALYSIS 12 References Amazoncom 2014 Amazon Retrieved from httpWWWamazoncombnode239366011 Anders G 2013 November 7 No stores No salesmen No pro t No problem for Amazon Retrieved from httDWWWtechnologvrevieWcomnews520801nostoresnosalesmen noprofit noproblemforamazon Ethridge and Associates LLC nd Marketing opportunity analysis Retrieved from httpWWWethridgecomcommunicationservicesresearchmarketingopportunity analysis Goodfellow P 2012 August 28 Amazon 1 in customer service but will this lead to sustainable loyalty Retrieved from httpWWWforbescomsitesprospernow20120828amazon1incustomer servicebut Willthisleadtosustainableloyalty Hanselman A 2011 April 7 The six ingredients of customer delight Retrieved from http socialmediatodaycom andyhanselman 55 10486ingredientscustomerdelight Investor Relations 2014 Amazon Retrieved from httpphxcorporateinnetphoenixzhtml c97664ampDirolfaa Market Watch 2014 February 28 Amazon com Inc Retrieved from httpWWWmarketwatchcominvestingstockamznfinancials innance 2009 Value driver Retrieved from httpWWWgfinancecomdictionmvaluedriver UKEssays 2014 Value chain and its components Retrieved from httpWWWukessayscoukessaysbusinesstheoryvaluechainanditscomponentphp Venkatesh R 2011 Why Amazon is the best strategic player in tech Retrieved from httpWWWforbescomsitesvenkateshrao201 1 12 14theamazonplaybook Walters D amp Rainbird M 2007 Strategic operations management A value chain approach New York Palgrave Macmillan VALUE CHAIN ANALYSIS 13
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