Digital business is a procedure of using digital technology to adapt the business model. It makes a company to effectively engage its customers. It is essential for business to bring innovation for development of goods and services, enhance customer experience and growth of company. The report will state key trends of digital technology of that use by the Amazon Company and its advantages and implication on the business. The Amazon is a web service provider and an online retailer. It is a multinational company that emphasis on e-commerce, digital streaming as well as on cloud computing. It serves product to its customer such as beauty and health related products, electronics, grocery items, industrial module, kids products, toys and sports good. The report will cover digital business model which is used by the Amazon along with some drawbacks related to this. It will also provide information of strategic alliance and new collaborative relationship through digital technology of Amazon and how these impact the working of business. It will highlight the application of Artificial Intelligence in each and every activity of the business. The report will cover the benefits that Amazon has through use of AI and also describe some challenges face by the concern business.
Main Body
Key Trends, Advantages And Implication Of Digital Technology
In the digital world, every business makes use of digital technology likewise Amazon also uses technology for its business in many ways so that enhance customer experience. Awareness of key trends is important for the company as it furnishes better insight for the business. Some key trends of Amazon Company-
Artificial Intelligence- The Amazon Company uses artificial intelligence for running its business in a systematic manner. Artificial intelligence is software that thinks brilliantly and intelligently. The AI use by the company for several things in business such as for detecting frauds, development of chatbots, voice recognition and for recommending products to customers like ‘ what other customers bought’ and ‘ you might like this’ (Ruiz-Real et al., 2021). The company also uses AI for Amazon products like Alexa and Amazon’s recommendation engine and for Amazon warehouses. With the help of AI, it is noted that 35% of total sales by Amazon done through recommendation given by the AI. The Amazon make use of AI for the efficiency in the supply chain, it includes foresee the demand for products, for maintaining inventory levels and for making orders. Alexa of Amazon use AI for giving authentic and accurate answer to the questions of the customers. Through use of AI, it furnishes information of product, weather, traffic and so more.
The advantage of AI to Amazon is that it enhances customer interaction by correctly respond to the enquiries of the customers. It is a best and important technique for the Amazon because it needs to communicate regularly to customers (Cioffi et al., 2020). It is beneficial for enhancing personalized shopping experience of customers by recognizing their pattern of browsing habits and purchasing behavior of customers.
The implication of AI in the business of Amazon is that it increases the productivity and efficiency of the business by engaging more customers to the business by recommending products according to the preference of customers.
Robotics- The Amazon Company use Robots in its business. The use of Sparrow robot in the company aids in recognizing products and putting them out. The robot move racks, distribute box, containers and make delivery of products in the building (Sanneman, Fourie and Shah, 2021). The robot assist employees as it decrease movement of employees for lifting and assembling products. The use of robots helps in speed up delivery of product by 25percent.
The Amazon get various benefits from the use of robotics, it increase efficiency in doing work as Robots are enable to shift products all over the warehouse and make the employees free to do and emphasis on other work.
With the use of Robots in the business and warehouse of the Amazon, the rate of injury and accidents reduces. As the work of carry heavy bags, shifting of containers done by the robots at the place of human manpower. Application of robotics increase efficiency and productivity.
Internet of Things- IoT refers to the group of network of the connected devices and technology that helps in communication between various devices and cloud and between the devices as well. The Internet of thing makes easier to use Amazon Web Services, services such as Amazon Kinesis, Amazon Cloud Watch and so more. The Internet of Things helps in collecting the data, processing and analyzing and act on the data that generated through connected devices.
The Internet of thing is advantageous for the company because it restricted the interference of other devices and secured the transmission of data to other online platforms. It provides end-to-end security. It is beneficial for collecting the data, processing and analyzing and act on the data that generated through connected devices.
The Internet of Things has remarkable implication as it increases efficiency. The AWS IoT provides support to number of devices and messages and generates new data (Sestino and De Mauro, 2022). The IoT assists the company to achieve competitive advantage by improving operations.
Big Data- Big data means huge and different set of information that grow at increasing rate. The big data can be gather from the comments of public on websites and social network, collect from personal electronic devices and apps and through product purchases. Amazon assemble this data and with the use of data evaluating techniques and by transforming this raw data in a valuable insight help the business in its operations and making marketing strategies (Sestino et al., 2020). With the help of this, Amazon makes smart decisions on stock placement, transportation and so more. It leads to make deliveries of product on time, decrease operational cost and enhance satisfaction of customers.
The most important advantage of big data to Amazon is that it is beneficial for setting pricing for the products. Through constantly tracking the prices of competitors, market trends and demand of customers, it helps the Amazon in adjusting the price to remain competitive in the market.
The big data aids business in doing more research and boost up the process of innovation. By using big data the company is able to reduce cost of shipping by locates the nearest warehouse to customers. It provides greater understanding to company about its expenditure and help in recognize area where unnecessary expenditure is done, so that company can enhance efficiency.
Digital Business Model
The digital business model is based on new services in the market. Customer purchases and dealing is based on digital channels. It empowers business to build value and earn revenue through online. In this, products and services delivered to the customer without requiring any physical presence (Bican and Brem, 2020). The digital business model uses various digital technologies to reach the customers. Some digital business model use by the Amazon are-
Freemium Model
Amazon uses freemium model for its product, it offers a platform to its customers where billion of products can order. This model permits the users to obtain free access of some version of product. This version is limited but the customer has an option to get full access by upgrading and paying premium for the additional features. In Amazon Company, Amazon Prime is an example of this which provides two-day shipping guarantee (Boudreau, Jeppesen and Miric, 2022). The benefit of this model is that it acquires more users, enhance customer engagement, increases revenue of the company. There are some drawbacks of this model as the company reduce it cash reserve by providing support to non- paying customers. It takes a lot of time and money to convert the non- paid customers to paid ones.
Subscription
Subscription means charging a payment from customers. The Amazon is also use this digital business model, it offers various digital services such as music, video and cloud computing. The use of subscription by the Amazon to makes delivery of physical goods straights to the doors of customers (Schneider and Imai, 2020). This business model ensures that company earns a regular income while making a good relationship with the customers. The drawback of this model is that there are high churn risk means that the customer may cancel their subscription.
On-Demand Model
The On-Demand Model is a collection of technology, offline services, all services are carried out on a single online platform. In this model, with the help of apps consumers look for services and the company fulfill demand within minutes. The On-Demand Model means to virtual goods or services like online videos store such as Amazon Prime Videos. The customers can watch the videos for a particular period of time. This model is flexible option for customers as they get 24 hour 7 days a week services, the payment mode is hassle free as it provides inbuilt payment method for the ordered product (Vaska et al., 2021). The drawback of the model is that this service of company is not available at all locations, thus it is a drawback for the customers to whom the service is not accessible.
E-Commerce model
The E-Commerce digital business model was first and successfully adopted by the Amazon, it is the first company that sells physical products online. There are 6 kinds of e-commerce business model Business-to-Government, Business-to-Business, Business-to-Consumer, Consumer-to-Consumer, Consumer-to-Business and Business-to-Business-to-Consumer. This model helps the company to customize the store as per the expectations of the customers, the retarget the potential customers by sharing coupon while customer leave the checkout page (Lakshmi et al., 2020). There are some drawbacks of these model as the customer have face some trust issue because they can`t touch the product and the customer remain unconfident about the quality of the product. The E-commerce sites take all information of customers such as name, phone numbers and bank details. There are chances of misusing these details if the data is leaked. Nowadays, e-commerce is very competitive as the online market is expanding very rapidly.
In this model, the platform connected buyers and seller and charge a payment or fee in form of membership or consideration for the transaction. The Amazon use this model and give opportunities to third-party sellers to sell their products on Amazon platform. The biggest issue in this model is complication and dynamics (Derave et al., 2021). The problem is that if the platform has no sellers than it is not possible to attract the customers.
Ecosystem Model
It is one of the most dynamic but strong digital business structure. The Amazon offer varieties of interrelated services that help to build a network that tie customers. Amazon builds a infrastructure to serve the customer on e-commerce platform. The Amazon also provides different services to its customers on different platforms like provide online services, entertainment services through Amazon Prime. The company use data of current customers through the help of ‘vendor-lock in’ effect of ecosystem. The digital ecosystem has capacity to grow but there are some challenges and risk because of size. The main problem is security of data and privacy. The data is shared and tracked within the ecosystem, there is a risk of misuse of data and cyber attacks for the data.
Impact Of New Collaborative Relationship And Strategic Alliance Through Digital Technology
In today`s time, the business world is considered as dynamic, complex and interrelated. As consequences of this, companies are increasingly forming strategic alliance and treated as a important means to achieve marketing success. With the help of collaborative partnership, it allows businesses to grow and gain competitive advantage in global market. The success of Amazon is also based on the strategic alliance. By collaborating with the companies such as Microsoft, Apple, Google and SAP, the Amazon Company obtains access to high-powered technologies, increase customer base, maximize their offerings. Some impact of strategic alliance through digital company in Amazon are-
Help in attain Resources- The new collaborative relationship and strategic alliance through digital technology benefited Amazon Company in attain new resources in those field where company have lack of resources. In the rapid changing digital environment, stay at the lead in technology is essential and required thing (Varadarajan, 2020). The Strategic alliance helps the company in gaining deeper understanding on the use and obtaining access to technology and aid in bring efficiency in the company by identify the products need by customers, increase product offerings, knowledge of market, sales information. It helps the company to get expertise in different areas to attain its goal.
Enhance Innovation- The strategic alliance and collaboration through digital technology give an opportunity for developing and applying innovation procedure using new methods and solutions in the technology sector. The Amazon Web Services make a agreement with BlackBerry QNX. These both together make a Intelligent Vehicle Data Platform called BlackBerry IVY (David and Brett, 2024). As a result, a strategic alliance open a new and emerging ways for innovation, the both AWS and BlackBerry have a common objective to give automakers and developer a better understanding so able to deliver good and new services to customers. Strategic alliance is essential for bringing innovation in the company as well as opening new avenues for business.
Better shopping experience-The strategic alliance of Amazon with the Meta, helps the Amazon in improving shopping experience of the customers. In this alliance, the step is taken to join social media and e-commerce, this unite makes able the users to do shopping directly through Face book and Instagram. These alliances remove the need of user to leave platform of social media to finish the transaction on Amazon. With the help of this alliance, the Amazon enables to enhance user engagement from platform of Meta (ECommerce Evolution: Amazon’s Strategic Alliances with Meta and Snapchat to Redefine Online Shopping, 2024). It increase visibility and sales of Amazon while providing customer satisfaction. With the help of this shoppers get time-based pricing.
Increase Customer Base- The new collaborative relationship or strategic alliance is important for the business expansion. As collaboration or alliance is always a better option for the Amazon Company to increase its customer base. When company make alliance with the other companies it has an advantage of gaining customers of that company automatically. It is a good strategy that company can use to increase customer for their products and build a strong customer base too (He et al., 2020). With the help of strategic alliance the company by using technology can able to communicate and share information so that the company can make offerings according to the customers that aids company to increase customer satisfaction as a result enable to build a strong customer base.
Increase Revenue- New collaboration and strategic alliance work as a positive factor for the Amazon as it always increase revenue for the Amazon and allied partner. For example- In 2018, Amazon and Best Buy make a strategic alliance to sell Smart TV. Because of this alliance, the revenue of Best Buy increase by 4.7% in the fourth quarter of 2018. The Amazon benefited as it reaches to new audience through the alliance with Best Buy, as a result it increase the source of revenue for the Amazon.
Access to new technology- The Amazon Company obtains an access to new technology with the help of strategic alliance through digital technology. With the help of this, the alliance companies get an advantage to share their technology. The share technology helps the Company to improve performance and achieve goals while use of technology effectively. Access to new technology aids the Amazon in doing innovation for Amazon products (Martínez-Caro, Cegarra-Navarro and Alfonso-Ruiz, 2020). With the help of emerging technology company can improve its supply chain so that customers get their order at the right time. Technology assists the company in management of the warehouse by tracking and recording all supplies and ensuring placement of order on the time.
Limit Risk- The Amazon Company get benefited from building collaboration through digital technology as it limits the risk because while working with partner company , the company is able to delivered high quality services to its customers (Mühlroth and Grottke, 2020). As the both companies share their expertise, resources and technology, it leads to build a final product that make a positive impact on the potential and target consumer. These help the companies to grow the companies and their brands as well.
Challenge in facing cultural barriers- The collaboration and strategic alliance have some challenges as well as the Amazon Company has to face some issue related to culture and language barriers. Sometimes, it becomes difficult to connect with the alliance company as a result leads to become challenging to reach the objectives of alliance. It makes difficult to take decision quickly in the company due to this it leads to delay which is not good for company`s performance. To avoid such issues in the company alliance, the Amazon should employ an individual who is able to speak and understand multiple languages to help the alliance. Another way is to provide training to employees related to working in different cultures.
Risk of Company`s reputation- There are some snag of strategic alliance as sometimes there is a risk to reputation of company due to this. If the alliance company is unable to fulfill its actions, it leads to change the perception of public. The public may considered both company as untrustworthy and this leads to harm company`s goodwill in the market and advantage of it taken by the competitive company in the market. To avoid such type of situation, the business needs to fulfill their actions. For this it is necessary to have a clear and honest communication with the working company so that able to attain the goals.
Application of Artificial Intelligence
The application of Artificial Intelligence is increasing very rapidly. AI is a mixture of Machine Learning and Deep Learning. It is used in each and every business as it makes work simple for the business and reduces workload of employees.
The use of AI is begun in the education sector too. The use of it leads to increase productivity among faculties and help them in focusing on students rather than administration work.
The application of Artificial Intelligence is done in the electronic devices such as laptops, personal computers and phones. The AI use facial recognition technique to identify and giving security access. In several businesses industries it is used in a high security area.
The AI is use in the healthcare to build machinery that can effectively detect diseases and properly recognize cancer cells. AI is helps in evaluating chronic situation with lab for the fast diagnosis.
Application of AI in E-Commerce platform-
The use of AI is crucial in E-Commerce platform, it is useful for the business as it help in evaluate and understand the pattern of customer behavior, help in enhance the better shopping experience of customers.
Personalized product recommendation- The use of AI helps the Amazon Company by recommending products to the customers by using the data which is based on customer behavior, browsing history and buying history (Samal et al., 2022). For this the company use algorithm called “item-based- collaborative-filtering”. The AI recommended product like “people also buy” and “customers also” viewed.
Chatbots and virtual assistants- The use of chatbots and virtual assistance like Alexa helps the Amazon Company in improving services of customers by solving customer queries and facilitates the online shopping by giving recommendations (How Amazon Uses Artificial Intelligence, 2024). It helps in developing product by collecting data of customers and improves customer satisfaction. With the help of AI, cost for customer services reduces as it automatically solves disputes and makes refunds.
Inventory management- Artificial Intelligence helps Amazon company in management of their inventory. These aids company in better forecasting of inventory so that there is no shortage of product and the customer get right product at the right time. The integration of AI with enterprise resource management (ERP) as well as business intelligence (BI) system gives an alarm for the problems that need to address before reaching to bottom line.
Detection of Fraud- As at the platform of Amazon, number of transaction takes place every day, there is high chances of risk of untrustworthy or fraudulent activity .For protecting the company`s interest and its customers, Amazon use AI for detecting as well as for blocking distrustful or suspicious account and recognizing and eliminating defrauding listings (Priya and Saradha, 2021). Thus, AI plays a crucial role in this.
Analysis Image and Video- The Amazon use AI to evaluate images and videos so that improve the validity and correctness of its product recommendation. Also, it uses to recognize and eliminate unsuitable offensive content from the Amazon platform.
Benefits and challenges of using AI
There are several benefits of using AI, which are as follows-
Increase Sale- The use of AI is beneficial for the Amazon Company in increasing sales by collecting and evaluating customer data and also by recommending products according to the need of the customers. When a company has more data, it always helps in engaging more customers with the right information at the right time (Finlay, 2020). According to customer data, company can develop new products and increase sale by engaging new customers.
Provide more personalized services- The AI evaluate feedbacks of customers and big data to measure the interaction of customers. The Amazon uses this data to furnish a good customer experience. It helps the company in offer products to customer which influences them to purchase. When company offers products according to the need and preference of the customers, it leads to increase customer satisfaction. As a result the customer prefers to do shopping from the particular platform and recommended it to others as well.
Allocation of time and resources- AI assist in automate work and processes such as emailing, fulfillment of order, customer services and process of payment. The automation aids the company in reducing labor costs, enhancing productivity so that more emphasis given on innovation in process, method and product. AI assist in forecasting demand for product as a result reduce the error and unavailability of product.
While AI has number of benefits, it has some challenges as well that are as follows-
Data Privacy- The AI is largely dependent on data that contain sensitive information of customers, therefore the concern of privacy increases. The AI use consumer data for making recommendation to the consumers. If the data may leak or possessed by the wrong person than there is a possibility that data may be misused such as cyber bullying or theft.
Need more Initial Investment- The implementation of AI in business is quite expensive. For this, the company needs to do investment in infrastructure as well as it needs maintenance. For this, the company need to be relying updated as it work on latest updated software or hardware (Lee and Yoon, 2021). It seems to be quite costly for meeting these requirements. It is a challenge because it is not necessary that the AI always give good return on investment.
Poor customer services- Due to AI, the customer services are dependent on the chatbots, the company may fail to give exact same support as human representative can give. As a result, there is dissatisfaction among customer and reputation of company may harm. Due to this many employees lose their jobs.
Conclusion
To sum up, it is concluded that need of digital technology for operating a business increases with the process of digitalization. Digital business is necessary for engaging more customers in the business. The report stated the key trends of Amazon such as Artificial Intelligence, robotics, IoT and big data with its advantages and implication on the business. It describes the digital business model that is used by the Amazon like freemium model, marketplace model, subscription model, digital ecosystem model and e-commerce model. The strategic alliance through digital technology plays a important role in a success of business, the report highlighted some impact of this including attainment of better resources, technology, innovation, better shopping experience, good customer base, limit risk, cultural barriers and so more.
The report stated the use of Artificial Intelligence in the every aspect of the business as it significantly developed over the previous years. It highlighted the use of AI in recommending product to customers, management of inventory, detection of fraud with some benefits and drawbacks, Thus, it is concluded that doing business with using digital technology through digital platform enhance productivity, strengthen business alliance, improve efficiency, bring innovation and effectively increase customer satisfaction while reducing operating cost of business.
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