Managing Strategy: Amazon Company - Essay Example

?Managing strategy: Amazon case study Amazon strategy case study Introduction Amazon.com was founded in 1994 by Jeff Bezos in Seattle. Jeff Benoz chose the name Amazon from the world’s largest river since he believed that Amazon would eventually become the world’s largest bookstore due to brand reputation (Osterwalder and Pigneur, 2010, p 6). It took less that a year for Amazon to become the world’s largest online bookstore with more than 1 million book titles. The vision of the company is based on customer need fulfillment through innovation and use of the internet technologies. Amazon served three distinct customer groups that include seller customers who sell their products through Amazon fulfillment facilities, developer customers who use Amazon web services that enable them to create any virtual business and customer customers who buy low priced and a wide variety of Amazon merchandise (Osterwalder and Pigneur, 2010, p 23). 1. Amazon strategy Amazon current business strategy is based on high customer value and experience. Amazon has a low cost structure that ensures that customers access products and services at the lowest prices in the market. In addition, Amazon strategy is based on customer convenience through guaranteed on-time delivery with no compromise to the quality of the products and services (Osterwalder and Pigneur, 2010, p 76). The business strategy has been ‘customer-centric’ in terms of the wide variety of products and increased product innovation. The key pillars of the strategy include selection, price and convenience. Although Amazon was originally thought as an online bookstore, the company has established several physical strategic centers that are used to ship customer products such as the Hazleton facility that serves Northeast customers. The company has leveraged on technology to understand the customer purchasing patterns and needs and also delivery the products to the customers. Technology enabled the company top expand the product portfolio with new innovative products such as Amazon web services, kindle and digital products. For instance, the Kindle which is a wireless electronic reading device was unveiled in 2007 thus enabling customers to conveniently download and save books from kindle store without extra costs for the wireless access (Osterwalder and Pigneur, 2010, p 235). Another innovative product is Amazon web services that allow IT vendors to host both hardware and software in their own data centers. The web services include products such as AWS premium support, Amazon Mechanical Turk, Amazon CloudFront, and Amazon EBS. In addition, Amazon expanded the digital products division in 2007 through launching MP3 music store that allows customers to listen to digital music without restriction. In 2008, the launch of IMDb.com which is a subsidiary allowed customers to watch more than 6,000 full length films and favorite TV series. The company is committed to enhancing the accessibility of the products and services to customers in order to create customer convenience and customer value. In 2008, the company launched a currency converter that enables global customers to pay for their products in US dollars and ‘Bill Me Later’s” which is a next generation payment service that enables customers to make instant online payments without using a credit card. Amazon TextBuyit service allows customers find and shop for Amazon products using a text message or web browsers. Amazon has implemented aggressive product diversification strategy. The company also diversified in the sale of motorcycle spare parts and software products that feature other languages such as Spanish. The company has also made various mergers and acquisitions in order to access markets and capital. For instance, it acquired Fabric.com which is a leading supplier of cut fabrics, sewing accessories and tools. The company has reported impressive financial results over the past few years. Other major acquisition was that of AbeBooks and Reflexive Entertainment. Some of the direct competitors include Wal-Mart, Barnes & Noble, e-bay, Netflix, Overstock.com, Samsung (Media), and Target. Other indirect competitors include Google, brick and mortar stores and third-party wholesalers. 2. Amazon internal environment Amazon offers on-stop shopping platform for its customers and is geared at providing higher customer value at competitive prices. The company has attained brand reputation due to on-time delivery, expanded product portfolio and transactional security. The SWOT analysis can be used in evaluating Amazon internal environment. There are numerous strengths, weaknesses, opportunities and threats that may either foster or hinder the attainment of Amazon long-term mission and objectives (Osterwalder and Pigneur, 2010, p 29). Strengths One of the strengths of Amazon is the low cost structure that enables the company offer competitive prices in the market. Amazon has benefited from high economies of scale and emerging technologies in reducing the costs associated with serving the customers. Kindle wireless reading device that has created switching barriers for the customers. Amazon also offers free, safe and guaranteed on-time delivery for purchases worth $ 25. Amazon enjoys high brand reputation and recognition is major international markets such as Canada, Germany, North America and United Kingdom thus can easily penetrate in to the emerging markets like South American countries. Amazon enjoys superior online presence and leading technologies that facilitate customer needs analysis, online product delivery and customer relationships management. Amazon has diversified in to new innovative products such as web services, digital products and jewellery that will increase the profits of the company and hedge against market risks (Osterwalder and Pigneur, 2010, p 87). Weaknesses The low pricing strategy may be counter-productive since some customers associate cheap pricing with inferior goods. In addition, the free delivery service may be expensive and unsustainable in the long-term due to the increase in the number of customer and increase in shipping costs (Osterwalder and Pigneur, 2010, p 90). Opportunities Amazon.com can collaborate with public sector in providing public libraries that enable the users to access antique books. Amazon can either merge or acquire popular retailer companies like Macy’s and Target. Amazon can also expand the number of physical stores and warehouses in order to act as distribution centers in places with high customer volumes such as New York City, Washington, D.C and London (Osterwalder and Pigneur, 2010, p 99). Threats Amazon faces several threats such as online security issues since the websites collect customer personal information like credit card details that are targeted by online fraudsters. Amazon has been accused of tax avoidance, but the US government has proposed measures that will see Amazon pay higher taxes thus leading to decline in profitability. Amazon also faces high competition from other online bookstores like Barnes & Noble, digital music providers like Sony, Samsung and e-bay which is also a major player in e-commerce business (Osterwalder and Pigneur, 2010, p 110). 2. a. Competency framework Amazon has attained certain competencies that are critical for the long term success. Some of the competencies include a high degree of product innovation, global geographical coverage, low prices and managerial expertise. Amazon has eliminated the location barriers through offering online book store and free delivery of products worth $ 25 dollars and above. In addition, the company has invested substantial in highly skilled manpower in order to facilitate the research and development activities and customer relationships management (Osterwalder and Pigneur, 2010, p 112). 2. b. Porters value chain Michael Porter’s value chain analysis can be used to identify Amazon core competencies and determine the activities that drive competitive edge in the industry. The value chain entails both the primary business activities and support activities that drive customer value (Sekhar, 2009, p 116). The primary activities are inbound logistics that include warehousing, inventory and transportation. The second primary activity is operations that include assembly and distribution. The third primary activity is outbound logistics that include order processing (Saxena, 2009, p 520). The fourth primary activity entails marketing and selling activities which include selling, pricing and customer channel management while the last primary activity is after sale services to customers. The support activities include the firm’s infrastructure, technology, procurement and human capital management (Barnes, 2001, P. 55). Amazon is endowed with key competencies that are essential in attaining competitive edge in the market. One of the competencies is the inbound logistics that entail wide variety of product offering include thousands of book titles and music. Amazon operations entail a low costs structure that involves enabling customers to access and shop for numerous products through an online platform (Barnes, 2001, P. 55). Amazon outbound logistics supports instant order fulfillment and on-time guaranteed delivery. Amazon has attained a competitive edge in marketing and selling since it is capable of understanding the unique customer buying patterns and advertise the products through websites (Saxena, 2009, p 521). Amazon products are competitively priced while online solutions enable the company to manage customer relationships and handle complaints. The key support competencies include advanced e-commerce technologies, highly skilled workforce and abundant financial resources that have enabled the company to diversify the product portfolio and acquire numerous companies. The company has partnered with several book publishing companies and music producers in order to control the bargaining power of the major suppliers (Barnes, 2001, P. 56). 2. c. VRIO analysis VRIO analysis can be used to evaluate the capabilities and resources of Amazon. The competitive resources and capabilities must be valuable, rare, difficult to imitate and organisation must be capable of making good use of the resources (Peng, 2009, p 72). Some of the key resources include technology, financial resources and brand reputation. Technology and financial resources are valuable resources since they will help Amazon exploit several market opportunities and meet the external threats (Overbeck, 2009, p 116). Technology has facilitated new product development and innovation thus leading to sustained competitive edge. Kindle wireless reading device is an example of rare resource and is difficult to imitate thus can sustain competitive advantage in the market. Amazon is capable of organizing the unique resources in order to attain expanded market share, brand reputation, higher customer satisfaction and profitability (Warren, 2008, p 93). Conclusion Some of the key elements of Amazon current strategy include high product innovation and new offerings, competitive pricing due to an efficient supply chain, high customer satisfaction and customer convenience. Other elements of the strategy include mergers and acquisitions. Some of the key resources and competencies that have driven the strategy include highly qualified personnel, huge investments in new technology, and abundant financial resources. The company strategy is committed to easing shopping, offering new products such as music, web services, Kindle and customer accessories such as motorcycle spare parts and sewing tools. Some of the strategic acquisitions include IMDb.com, woot.com and Zappos.com. Amazon future strategy should aim at collaborating with supply chain partners, forward-integration and investing in research and development activities in order to sustain the current competitive advantage. Bibliography: Barnes, D.W. 2001. Understanding business: processes. London: Routledge. Osterwalder, A and Pigneur, Y. 2010. Business model generation: a handbook of visionaries, game changers and challengers. London: John Wiley & Sons. Overbeck, S. 2009. Supply chain management: a critical analysis. Muchen: Verlag. Peng, M.W. 2009. Global strategy.2nd ed. Mason: Cengage Learning. Saxena, R. 2009. Marketing management. 4th ed. New Delhi: McGraw-Hill. Sekhar, G.S. 2009. Business policy and strategic management. London: IK International Publication. Warren, K. 2008. Strategic management dynamics. West Sussex: John Wiley & sons. Read More