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Amazon.com benefits from collaboration between competing firms

Date:
February 2, 2015
Source:
Lappeenranta University of Technology, LUT
Summary:
Online-selling pioneer Amazon.com has utilized three individual business models, by means of which it engages in productive cooperation with its competitors. By harnessing its competitors within its own business operations and by looking strategically at customer value, Amazon.com has managed to raise the size of its current markets and to create entirely new markets both for itself and for its competitors. Through its competitor cooperation-driven business model, Amazon.com utilizes the existent resources most effectively, because it involves competitors in distributing the expenses incurred by business operations.
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Online-selling pioneer Amazon.com has utilised three individual business models, by means of which it engages in productive cooperation with its competitors. By harnessing its competitors within its own business operations and by looking strategically at customer value, Amazon.com has managed to raise the size of its current markets and to create entirely new markets both for itself and for its competitors. Through its competitor cooperation-driven business model, Amazon.com utilizes the existent resources most effectively, because it involves competitors in distributing the expenses incurred by business operations.

These results emerge from the research conducted at Lappeenranta University of Technology (LUT) by Professor Paavo Ritala and his Swiss research partners Arash Golnam and Alain Wegmann, and published in the first-and-foremost scientific journal in the field of international industrial marketing. The Industrial Marketing Management (IMM) journal reports the article to be the most frequently downloaded amongst the group of publications appearing in 2014. Coopetition-based business models: The case of Amazon.com has been downloaded over 4,500 times -- which means that researchers in the field have read the publication diligently. This generally points to favourable impact with regard to both further research and practical applications.

Three competitor cooperation-driven business models

Amazon.com's three business models in which it has strongly involved its competitors, are named as follows: Amazon Marketplace, Amazon Services and Amazon Web Services, and Amazon Kindle.

Amazon Marketplace gives Amazon.com's competitors the chance to use the company's own market venue. In other words, when Amazon.com sells, for example, some book on its website, competitors are also permitted to offer the same product there -- even more cheaply. If the competitor purchases the book concerned from a competitor via the Amazon.com website, Amazon.com is permitted to keep part of the sale proceeds.

Amazon Services and Amazon Web Services on their part offer the online shopping platform and server capacity to their competitors. For example, Amazon.com helped the Borders book retailer as well as Netflix, which distributed films and TV series on the Internet, to the extent that they obtained their own marketplace within Amazon.com's infrastructure: i.e. they operated by using Amazon's servers or website base. Amazon.com obtains revenues from operating the service and from its advancement for its competitors.

Amazon Kindle, an electronic reading device, enables coopetition -- collaboration between competing firms -- to the extent that it distributes its content to various competing platforms. For example, the Apple iPad consumer obtains Kindle application content without having to obtain an Amazon.com reading device separately. This way Amazon.com sells its own content also on competitors' platforms, thereby obtaining extra customers.

The world's most customer-centred business enterprise

"Amazon.com's method of doing business with its competitors is rare on this scale. The company's strategy is to be the world's most customer-centred business enterprise. Consequently, Amazon.com's mindset is not competitor-centred, as is often the case with companies. The digital business model excellently enables this sort of business action. However, I believe that the competitor cooperation-driven business mode could function in other sectors than only that of the ICT field," Professor Ritala declares.

In his view, research brings to the fore how, in a highly precise manner via a case enterprise, collaboration between competing firms can be utilised as part of a company's business model. Previously both competitor cooperation and business models have been studied -- as well as implemented in practice -- to a large extent on a separate basis.


Story Source:

Materials provided by Lappeenranta University of Technology, LUT. Note: Content may be edited for style and length.


Journal Reference:

  1. Paavo Ritala, Arash Golnam, Alain Wegmann. Coopetition-based business models: The case of Amazon.com. Industrial Marketing Management, 2014; 43 (2): 236 DOI: 10.1016/j.indmarman.2013.11.005

Cite This Page:

Lappeenranta University of Technology, LUT. "Amazon.com benefits from collaboration between competing firms." ScienceDaily. ScienceDaily, 2 February 2015. <www.sciencedaily.com/releases/2015/02/150202080628.htm>.
Lappeenranta University of Technology, LUT. (2015, February 2). Amazon.com benefits from collaboration between competing firms. ScienceDaily. Retrieved May 27, 2017 from www.sciencedaily.com/releases/2015/02/150202080628.htm
Lappeenranta University of Technology, LUT. "Amazon.com benefits from collaboration between competing firms." ScienceDaily. www.sciencedaily.com/releases/2015/02/150202080628.htm (accessed May 27, 2017).

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