3 Reasons Amazon Is the World's Best Business

3 Reasons Amazon Is the World's Best Business

3 Reasons Amazon Is the World's Best Business

 Here are the three reasons why Amazon is the world's best business:

 It has a sustainable competitive advantage

Competitive advantage is measured by market share leadership which flows from three sources.

- Giving customers more value for money

People compare different suppliers on a ranked set of factors, when they buy anything. Those factors are also called as customer purchase criteria (CPC), which include price, fast delivery and reliable service. Consumers prefer Amazon because it does much better than its competition on these CPC.

- Harnessing capabilities to win at scale

Winning and keeping customers, even when a company has millions of customers, depends on doing few things very well. For Amazon, such capabilities include offering a wide selection of products and services, operating an efficient supply chain to fulfil orders and providing excellent customer service.

- Sustaining competitive superiority

While many large companies can do the first two things in one industry, like Apple did in smart phones - very few can stay ahead as competitors try to copy their strategies and make successful bets on new growth opportunities.

Amazon did this first in online book selling and has continued to lead - it controls about 40% of the U.S. e-commerce market.

2. Jeff Bezos is known as the world's best founder/ CEO

Competitive advantage does not simply happen — CEOs must create it. Specifically, the CEOs with the highest net worth tend to be founders of the largest, fastest-growing companies - people like Amazon's Jeff Bezos, whose net worth now tops the world at $120 billion, Facebook's Mark Zuckerberg and Alphabet's Sergei Brin and Larry Page.

Apple — which at $861 billion has a higher market capitalization than Amazon's $670 billion — suffers because it is so dependent on an 11-year-old product: the iPhone.

3. Its bets on growth create big new revenue streams

What makes Amazon the world's best business and Bezos its top CEO is his exceptional skill at turning bets on growth into wide new revenue streams.

Some of those bets are paying off now — others have potential to do so in the future.

Amazon created AWS by selling to companies the computing services it started building in 2000 to run its e-commerce operations. Today AWS is growing fast, with Q1 revenues up 45% to $5.11 billion. Its operating income rose about 46% to $1.35 billion.

Growth can come from well-managed acquisitions as well. For example, its $13.5 billion acquisition of Whole Foods generated $4.52 billion in revenue, representing about 7% of Amazon's revenue — a considerable increase over the $3.5 billion Whole Foods reported in the same period last year.

And after months of speculation, Amazon announced its health care play - a venture with JPMorgan Chase and Berkshire Hathaway to lower health care costs. It remains to be seen how this venture will achieve lower health care costs or whether these very different companies can work together effectively.

But one thing that makes Amazon so much better than its FANG peers is that it not only makes other bets, it makes them pay off. At the accelerated rate that Amazon is growing, one would not be surprised to see it hit that level this year.