Business Strategy of Amazon
Category : Amazon Case Study Examples, Amazon Examples, Jeff Bazos
With the advent of the information technology, specifically the internet, it is said that more and more companies are existing in the online world. The changes in the business market also allows customers to change and become more dependent on online stores and online shopping than go and find something in shopping malls or retail store. One of the existing and considered as the largest and competitive online shopping in the world is Amazon. In this report, the goal is to analyse Amazon based on the case study provided. The analysis includes the discussion of Amazon’s s strategic intent, main resources and capabilities. In addition, this will also include analysis of the resources and capabilities that give sustainable competitive advantage and the recommended future strategy for the company.
Overview of Amazon
Amazon has been considered as one of the largest bookstore and online store in the global market. The company has been able to thousands of customers in over 150 nations. Amazon’s main website offers millions of DVDs, music, books and videos not to mention their products from household, electronics, apparel and clothes, cosmetics, drugs and others. Thought the company has highs and lows, they are able to manage the companies and sustain their competitive advantage. The company has also used some strategies to ensure that they will outgrow their competitors like Ebay.
Accordingly, Amazon is a company that truly popularized the context of online shopping by having the largest product supply online. In addition, it is one of the first industries to sell products deep into the long tail by having them all in their numerous warehouse as well as distributing products through their partner companies.
The founder of the company, which is Jeff Bezos, started the company without the assurance of being profitable. Unlike any other websites, Amazon grew in a slow manner and had their first quarterly profit at the end of the year 2002. From the on the company has been able to sustain the competitiveness in the online market.
Amazon Strategic Intent
Based on the given case, the strategic intent of Amazon is to become the number one choice of the online shopping for their shopping needs. Their website has been made to provide more convenience for customers who wish to buy certain items right away rather than wait for the delivery (See Figure 1). Amazon can now direct their customers to local stores that presently have the product in inventory. Consumers need not call all the local stores and tolerate taped messages and long waits to find a product. Even such Internet pure-play firm as Amazon, through its partnership with Borders, for which it provides website operations, can direct customers to the nearest Borders store offering the desired product. Customers need only provide a zip code. Integration of physical stores and online operations can also lead to greater efficiencies. The strategy of the company uses the Internet and took advantage of its capability to reach more clients (Baldwin et al, 2002).
Repeat Customers as a Percentage of Order 1996 to 1999
Furthermore, Amazon strategic intent is to provide more options for their clients by partnering with other international and local suppliers. The company also diversified their offerings to different products, services, categories and other physical assets. Furthermore, based on the given case, the company’s strategic intent is to sustain their competitive advantage by compelling what the needs and demands of their target market and expanding their business portfolio in the global market. The company’s strategic intent is to do their business in a slow but sure manner by becoming innovative in what they are offering for the customers.
Another strategic intent of Amazon based in case is its goal to be recognised and respected as a global bookstore and online shopping brand and to dominate the global market through their high quality product and service offerings. As discussed in the case study, the advertising and marketing strategy of Amazon have been focusing on how the products would gain interest from their target market and how they can be able to generate sales with their products. This is Amazon’s stronghold where it continues to yield strong sales revenue by leveraging off its excellent online shop in different locations, such as in UK and other country, strong brand name and excellent reputation among customers. Amazon has also been continuing to create affiliate websites to expand their business market among various consumers.
Amazon’s mains resources and capabilities
The presence of strong as well as effective leadership in today’s organization imposes a great responsibility to the organization’s team and management networks as leadership implies the overall capacity of the organization’s performance like for instance, in terms of operations and research development. It can be said that Amazon’s resources and capabilities can be divided in the management of the company specifically their leader which is Bezos, the ability of the management to effectively use strategic supply chain management and aligning it with their business process and information technology, their competitive advantage in the online market, and the financial resources that it gains through its successful approaches.
Accordingly, the leader of the company has been able to use appropriate leadership style to solve the issue of the company in dealing with their online clients and consumers. In addition, it can be said that the transformational leadership approach of their leader as a transformational leader has been able to lead the company. T can be said that successful business organizations need vital leadership as the latter serves as a successful vehicle for the organization’s stability and growth within the global market. Based on the given case, Amazon has been able to use four views of leadership which include the transformation view, power, paradigm shift as well as social responsibility view (Proctor, 2000). However, the CEO of the company has focused on the area of transformation to meet the changing needs of the global market. Being a transformation leader that he is, the CEO of Amazon (Bezos) has been able to show a visionary value. The management of Amazon has been able to enhance not only the manager’s way of handling and managing their subordinates but most especially the fact that it enhances both the performance of the employee and the organisation as well which is very obvious in Amazon.
According to Kim and Weaver (2000), the administration and management of a particular business organization entails full utilization of the resources of the company in order to lead, direct, and control operations to meet the set objectives. Based on the given case study, it can be said that Amazon has been able to use strategic approach to sustain their competitive advantage. One of the capabilities Amazon is how the leaders of the company do their business. Guided by their vision and mission, the leader and management of the industry clearly illustrate integrity in all their actions. The management has also strong commitment in promoting the company values. In addition, the management of the company has been able to understand the priorities of the business and make every decision in line with the strategic direction by giving consideration to the effect on all aspects of the business and on other stakeholders.
Another sustainable capability of the company is its continuous focus on the importance of both internal and external customers to ensure that these customers remain loyal to them. Furthermore, the company’s ability to identify and recognise contributors is another factor that sustains the company’s competitive advantages. The ability of the management to diversify and differentiate their business strategy to dominate the global market can also be considered as the major capabilities of the Amazon.
Resources and capabilities that provide sustainable competitive advantage
In accordance with the case study to the business approach and strategies of Amazon it can be said that the company has been able to continue to grow and expand their business in the online market. It can be said that Amazon has been able to use various strategies which enable them to sustain their competitive position in the global market. Based on the conducted reviewed in the previous section, it can be said that Amazon strategy includes differentiation approach and innovative approach.
In doing so, the company has been able to have a sustainable focus on their core business values ensuring that their goals, objectives and mission are achieved. In addition, the company has been able to sustain good relationship with its target market and all other stakeholders and the company focus itself on satisfying the costumers by providing them quality products and services in the online. The ability of the management to manage their financial resources and limit their expenses to sustain their needs for expansion has also been considered as one of the capabilities that sustain their competitive advantage.
The strategies used by the Amazon include Intensive strategy, which aims to competently position and promote their products and services in the online market. The industry has also utilized the Integration strategy and forward integration in order to promote and closely manipulate where all the Amazon products and services are being sold. To improve financial performance, the company sees to it that they utilise all their resources in a manner that will be beneficial to enhance the performance of the company.
Based on the given case, it can be said that the two resources and capabilities of Amazon includes their flexibility and innovation strategy. It can be said that the ability of the company to expand their business is through their 'flexibility and innovation' which enable Amazon to counter the risks of erosion and losing of their competitive advantage. In order to cope with the various influences and effects of market environment changes, and to sustain their competitive advantage, the management of Amazon has been able to improve and expand its organisation so as to conduct business operations and activities on a global scale which include the expansion of Amazon through the online presence of the brand in different parts of the world and by making specific websites as well as considering merging and acquisitions (See Figure 2). Herein, the management of the company has been able to improve their organization structure its organisational structure to achieve their organisational objectives. In addition, the improved organisational structure is done in order to initiate speedy and flexible measures in managing their internationally diverse employees.
.Aside from this, the management of Amazon has also been able to focus on their research and development department and to initiate innovative strategies designed to provide a competitive advantage and edge in the marketplace. As business gravitates towards a global scale, entrepreneurs find themselves faced with the challenge of producing new and better products at reduced cost and market price. Daft (2003) pointed out that in managing a global environment, managers of Amazon must be characterised by the ability to bring about change through innovation and creativity. Further according to Daft, a revolutionised manager sees change, rather than stability, as the nature of things (2003). Innovation as a ground for doing business in the 21st century will be the consistent tugging force that the organisation must either strive to adopt or suffer the consequences of being left behind by competitors. In addition diversification approach is also considered by Amazon to ensure having sustainable competitive advantage. Part of the diversification is to generate new coffee products that would meet the needs of the consumers in various parts of the world. As discussed, the knowledge of the underlying sources of competitive advantage highlights the abilities and core competencies of Amazon as a world leader in coffee retailing industries. In this regard, the company must be able to determine strategies and ways to ensure that their competitive position and advantage are being sustained in all levels of the organization.
Indeed, making a business successful in a particular setting demands crucial and detailed studies and examination of the factors that will generate the best results that will serve the aims and objectives of the company. In this light, owners of big business organizations operating in a competitive business environment should be in constant look out with its competitors and the overall status and events in the industry. Taking advantage of the opportunities and intensifying the strengths while minimizing the risks and weaknesses of a business firm greatly helps in predicting the success in business enterprise
Jayne and Dipboye (2004) indicated that in highly differentiated industries intense competition results to more diverse operation systems and processes because the participation among different sectors within and outside the company is needed to gain more economic advantage. Assets, skills, and capabilities available to a particular business organization are pooled together to come up with better business strategies.
Amazon’s Future Strategy
It can be said that the Internet provides opportunities for the online companies to develop relationships with suppliers as well as customers. It has been found that the number of competitive moves increased as Internet usage increased for different companies in the world. It becomes more important to manage relationships as competition increases through the use of e-commerce. It can be stated that the most effective Internet strategy for that Amazon can use in the future is a collaborative one with their channel partners. It can be argued that a mixture of multiple revenue streams that monetizes content/database, uses e-commerce, and cross-sells through multiple channels is the key to success of Amazon. In addition, another future strategy of the company is to use integrated marketing communication to reach more clients in the global market.
Bradley, F. (1999). International Marketing Strategy. Hertfordshire: Prentice Hall Europe.
Daft, R. (2003). Management. 6th Ed. Cincinnati, Ohio: Thomson South-Western.
Edell, J. A., & Keller. K. L. (1993). Analysing media interactions: Print reinforcement of television advertising campaigns (Working Paper). Durham, NC: Fuqua School of Business, Duke University.
Hollensen, S. (1998). Global marketing: A Market-Responsive Approach. Hampshire: Prentice Hall.
Lowson, R. 2002, Strategic Operations Management: The New Competitive Advantage. New York: Routledge.
Papavassilou, N. & Vlasis, S. (1997). Standardization versus adaptation of international advertising strategies: Towards a framework. EJM, 31(7): 504-527.
Peteraf, M (1993). The Cornerstones of Competitive Advantage: The Resource-based View. Strategic Management Journal, 14(2), 37-46.
Porter, M 1998, Competitive Strategy: Techniques for Analysing Industries and Competitors. Free Press.
Proctor, T 2000, Strategic Marketing: An Introduction, Routledge, London.
Sloman, J. and Sutcliffe, M. (2003). Economics for Business, 2nd Ed. Harlow, England: Pearson Education Limited.
Williams, J. R. (1992). How Sustainable Is Your Competitive Advantage? California Management Review, Spring, pp. 29-51.