Strategic Planning of Amazon.com, Inc - Essay Example

Strategic Planning of Amazon.com, Inc. Table of Contents Task 4 1 Importance of External Factors 4 2 Needs and Expectations of the Stakeholders 5 1.3 Changes taking place in the External Environment 6 2.1 Analysis of current business plans 7 2.2 Position of Amazon.com Inc. 7 2.3 Strengths and weaknesses of Amazon 9 Task 2 10 3.1 Modelling tools to develop strategic options 10 3.2 Comparative understanding of the activities 12 3.3 Options for Future Organizational Strategy 13 4.1 Strategy Plan for participation of Stakeholders 14 4.2 Potential Options for the Strategy plan 15 4.3 Strategic Plan along with resource implication 15 Task 3 17 5.1 Comparison of Core Organizational values 17 5.2 Vision and Mission statement of Amazon 17 5.3 Future Management objectives of Amazon 18 5.4 Measures for Evaluating Strategy Plan 18 6.1 Schedule for the implementation of strategy plan 19 6.2 Dissemination process in order to gain commitment from stakeholders 19 6.3 Evaluation of the strategy plan after implementation 20 Reference List 22 Appendix 23 Task 1 1.1 Importance of External Factors PESTEL Analysis Amazon.com, Inc. has its headquarters in United States and the external factors of the country affect the business in the international market. Political Factors Amazon.com Inc. has set up its business in a number of countries and the political situation of US is favourable for Amazon to carry out its business successfully. Moreover, the company is not facing any immediate problem by operating in the Chinese market and restrictions have been lifted on the e-commerce business (Johnson, et al., 2013). Economic Factors The buying power of the customers in Europe and US has reduced whereas; the buying power of the customers in India and China has increased along with the use of internet. The economic factors of China are such that it helps the company to grow (Johnson, et al., 2013). Social Factors There are some societies which do not prefer buying over internet such as Peru. In these countries Amazon has low business opportunities and so it is unable to expand its business in Peru. Technological Factors Better connectivity as well as speed of the internet helps Amazon to spread its business in the global market. The e-commerce business of Amazon enables the users to choose products from wide range products offered by the company (Johnson, et al., 2013). Environmental Factors Amazon.com sells the products to the customers that are supplied by certified manufacturers. Hence, the company is sure about providing quality products to the customers which are environment friendly (Johnson, et al., 2013). Legal Factors The lawyers of Amazon.com are careful about the legal aspects of the different countries in which it operates. The law officers of the company are efficient enough in handling the legal issues of the company. 1.2 Needs and Expectations of the Stakeholders There are internal as well as external stakeholders of Amazon.com, Inc. The internal stakeholders are the employees, managers and the owner who have the expectation to earn huge revenue in the international market. They aim at expansion of the business as well as that satisfy the customers with quality products (Johnson, et al., 2013). The external stakeholders are suppliers, society, creditors, government, customers and the shareholders. Each of the external stakeholders has the motive to generate quality output with the investment that they have made on the company (Johnson, et al., 2013). The customers gain brand loyalty with the high quality products served to them as per their needs and they recommend the other interested customers to purchase the products. The employees in Amazon are trained in order to develop high quality websites as well as serve the customers with timely delivery of the products. It helps them to maintain a good relationship with the customers (Johnson, et al., 2013). Moreover, US government creates the laws that are favourable in carrying out the e-commerce business successfully. Hence, the expectation of the government is that the company will generate high revenue in the economy. Moreover, the suppliers of Amazon are the retailers who wish to sell their products through Amazon as it has gained a brand name in the global market (Johnson, et al., 2013). 1.3 Changes taking place in the External Environment The political factors in US and China is said to support the business of Amazon.com, Inc. and the e-commerce business is carried out successfully. The customers are offered with wide range of products and they are able to purchase the products online (Johnson, et al., 2013). The economic situation of US was such that customers are interested in purchasing the branded products from the international market. However, the international policies of US have affected the expected growth rate of Amazon.com. Moreover, the people in Peru have no experience with online purchasing and they are not efficient enough to utilize the facilities of Amazon.com, Inc. Hence, the changes in purchase behaviour of the customers in Peru affect the business of Amazon and the marketing strategies adopted by the marketing managers of the company (Johnson, et al., 2013). The development of the technology as well as the secured online payments modes enhances the performance of e-commerce businesses of Amazon.com, Inc. The technological advancement indicates that the customers are able to order the products online and even they are able to make the payments online. However, the law officers of Amazon take care of the customer grievances as well as the ability of the company to set up its business in different parts of the world (Johnson, et al., 2013). 2.1 Analysis of current business plans Amazon.com Inc, conducts its business in various fields such as internet services, online retail and the Kindle ecosystem. Amazon provides its services as Amazon Prime which has the facility of free of cost shipping within two days. It provides a free access to the kindle library (Johnson, et al., 2013). The other internet services provided by Amazon are referred to as Amazon Web Services and it is a side business as the company decided to lease out its services. Amazon is most commonly known as a low-cost retailer and provides its customers with wide range of products. The company started its online book selling business and rapidly expanding the business to music as well as movies. It also offers online services in household goods as well as electronics (Johnson, et al., 2013). The retail strategy of Amazon also involves the company to act as a channel for the other retailers and earn a portion of revenue with the sale of the products. Amazon has also introduced the sale of used products in order to compete with the competitors such as eBay (Johnson, et al., 2013). The advertising strategies adopted by Amazon attract the customers in the global market and they are able to choose the products from their websites. The kindle ecosystem is part of their business model which is newly launched by Amazon as an electronic book reader and the company is confident that the customers will purchase enough electronic books (Johnson, et al., 2013). 2.2 Position of Amazon.com Inc. Amazon.com Inc. is considered to be the 56th largest company in America in terms of market capitalisation. It is also the 15th biggest retailer in America in terms of revenue and it is the largest internet retailer from the customers’ point of view. The managers of the company were quick enough to realise that the e-commerce business would shift from the traditional computers to the mobile phones (Johnson, et al., 2013). It was the first to introduce the kindle as the electronic book reading mechanism. The company has successfully set up its third party marketplace which accounts for around 35% to 40% of all units that the company sells every year (Johnson, et al., 2013). In the year 2009, the company has recorded an annual growth of $15 billion in first three quarters of 2009 which is considered to be 20% higher than the previous year (Johnson, et al., 2013). The gross profit has also increased from 22.6% in 2008 to 23.7% in 2009 (Johnson, et al., 2013). However, there is an increase in the operational cost to the company. As per Porter’s generic strategies the differentiation strategy has been useful in attracting the customers in the international market and it has decreased the cost of searching the customers by differentiating the products (Johnson, et al., 2013). The company also follows the differentiation strategies on the products that are difficult to be imitated. Some of the fields in which the differentiation is made are the brand image, product features, product designs and the customer services offered by the company (Johnson, et al., 2013). The managers of Amazon.com focus on all these factors so as to drag the customers’ attention. The market focus strategy is another strategy that the company adopts in order to attract the target customers towards the products. Amazon either reduces the cost or differentiates the products and the services (Johnson, et al., 2013). The cost leadership strategy is generally applicable to the e-commerce companies such as Amazon in order to offer the customers with variety of products at cheap rates. However, there are customers especially the young generation in China who are less sensitive to the price. Nonetheless, managers in Amazon are able to undertake the cost leadership strategy in order to have a competitive advantage over the rivals (Johnson, et al., 2013). 2.3 Strengths and weaknesses of Amazon The cost leadership strategy is the most important step that is undertaken by the company in order to expand its business in the economy. The company offers its customers with wide range of quality products along with the detailed information regarding the products (Johnson, et al., 2013). The company enjoys the economies of scope to grow and expand their business in the global market. Amazon efficiently handles its distribution channels such that its products reach the customers on time. On the contrary Amazon has certain weaknesses that are it offers only online shopping facility and many of the customers have lack of knowledge related to the purchase of products online (Johnson, et al., 2013). The company often sells its products at zero margins. Moreover, there are cases when Amazon shares irrelevant information regarding the products that are not helpful to the customers. However, some of the customers prefer to check the items from a close distance and therefore the online shopping mode is not suitable for them. Amazon.com does not possess any sales personnel in order to deal with the customer queries regarding the quality of the product (Johnson, et al., 2013). Amazon faces a huge competition in the electronics as well as the general market segment from the companies such as Best Buy, Radio Shack, Walmart, BigLots and Systemacs etc. In comparison with the competitors of Amazon the company’s revenue increased by 23.22% as well as the sales growth increased by 1.53% in 2015 (Cummings and Angwin, 2015). Figure 1: Revenue Growth of Amazon compared to its competitors (Source: Cummings and Angwin, 2015) Task 2 3.1 Modelling tools to develop strategic options Figure 2: Strategies to be undertaken by Amazon (Source: Cummings and Angwin, 2015) The generic competitor strategies that Amazon.com, Inc. can adopt are based on the target of the company related to the business expansion and whether the company enjoys a competitive advantage due to the product differentiation (Johnson, et al., 2013). There are five strategies that Amazon.com, Inc. can adopt so as to enhance the performance of the organization. 1. A low cost provider strategy- This strategy would help the company to lower the cost as well as attract the target customer in the global market. It also enables the company to gain competitive advantage over the rivals (Johnson, et al., 2013). 2. A broad differentiation strategy- Differentiation enables the customers to choose from the wide range of products in the market and Amazon would be able to offer quality products that are rare in the market. 3. A best cost provider strategy- The attributes of the products satisfies the customers and in case if the company is able to lower the prices then there are increase in the number of target customers for the products (Johnson, et al., 2013). 4. Market focused strategy based on the low cost- Amazon can fix the prices of the products based on the market in which it operates. In case if the company operates in China market it can set the prices of the products high because the Chinese consumers are less sensitive to the prices of the products and are more interested in the quality of the products (Johnson, et al., 2013). 5. Market focused strategy related to differentiation- The differentiation of the products undertaken by the company can also be market focused that is it should be based on the tastes and preference patterns of the consumers. The design as well as the quality of the products can vary according to the consumers in different markets (Johnson, et al., 2013). The model is helpful for Amazon.com, Inc. to focus on the business expansion of the companies and the strategies to be undertaken to enhance the performance of the organization. The model acts as the strategic options that the organization can undertake to attract the customers (Johnson, et al., 2013). 3.2 Comparative understanding of the activities The strategies adopted by other e-commerce companies such as Walmart, Flipkart involve the improvement in the sales of the companies. The strategies that are adopted by the rivals of Amazon are as follows. 1. Content Optimization- Investments are made in the search engine optimization and purchasing the keywords that makes the consumers to be able to search the products of their choice (Johnson, et al., 2013). 2. Advertising and Promotions- Some of the e-commerce companies advertises the products such that the customers are able to gather knowledge regarding the newly launched products in the global market. The advertisements are made with the help of social media as well as electronic media so as to inform more customers regarding the products sold (Johnson, et al., 2013). 3. Point of sale data- Investments are made by the companies in order to purchase and analyse the online data that includes the site visitation patterns, market basket information, promotional offer and the redemption rates are manipulated by the e-commerce companies so as to expand their business in the global market (Johnson, et al., 2013). All the above strategies are undertaken by the competitors of Amazon.com, Inc. in order to capture a large market share. As per the study greater the number of facilities provided by the companies to its customers, higher the increase in loyalty of the customers towards the products of the companies (Johnson, et al., 2013). Moreover, the companies try to make the products available to the customers at affordable rates such that they need to switch to some other brand (Johnson, et al., 2013). 3.3 Options for Future Organizational Strategy The future organizational strategy set up by Amazon is based on five factors that the company needs to focus on. The products and services offered by the company needs to be improved in case if the organization prefers to increase the customer base (Johnson, et al., 2013). The customers are often attracted towards the high quality products and since in case of the e-commerce business the customers need to choose their products online (Johnson, et al., 2013). Hence, it is the responsibility of the company to serve its customer with quality products. The second aspect involves the target customers who are to be satisfied in order to increase the sales of the company (Johnson, et al., 2013). The customers are considered to be important stakeholders of Amazon. The company needs to manufacture wide range of products for the customers such that they can choose from the options provided. Technological innovation is the third most essential factor that the company needs to focus on. With the improvement in technology Amazon can satisfy large number of customers who prefer to purchase the products online. The technology also helps in improving the quality of products in the global market (Johnson, et al., 2013). The fourth important aspect that needs development in future is the distribution channels of Amazon.com. The increase in the number of distribution channels would enable the company to reach to interested customers in the global market. Moreover, Amazon has the option to differentiate its products and there are five options that the company can adopt in carrying out the product differentiation such as lowering the cost, quality, speed of delivery, capability of the company to address the queries of the customers and bringing innovation within the products sold by Amazon (Johnson, et al., 2013). The distinct features of the products would attract customers to purchase from Amazon. 4.1 Strategy Plan for participation of Stakeholders Types of Stakeholders Stakeholders Participating activities Internal Stakeholders Employees Improves the quality of websites in Amazon.com, Inc. Managers Monitors the performance of the employees Owners Takes important decisions related to the organization External Stakeholders Suppliers Supplies the products that are sold by Amazon.com Society Amazon.com, Inc has created a brand image in its e-commerce business within the society Creditors Provides funds to the organization for its growth Government Sets up policies that are favourable to the e-commerce business of Amazon.com Customers Makes online purchase of the products from Amazon.com Shareholders Shareholders invest based on the performance of Amazon.com, Inc. in the international market (Source: Author’s Creation) The above table indicates that the stakeholders of Amazon.com Inc, contributes to the improvement in performance of the organization in the global market. It ensures the appropriate participation of all the stakeholders within the organization. Amazon.com considers each of the stakeholders as important assets and ensures their participation to improve the overall participation of the organization. 4.2 Potential Options for the Strategy plan Amazon.com Inc, involves the stakeholders in implementing the strategies in order to improve the performance of the organization. The strategies are usually adopted by the organization in order to ensure growth and there are several growth options for the company such as diversification of the products in the global market (Johnson, et al., 2013). Diversification is an option for the company to increase the number of customer base and to have a competitive advantage over the rivals. Amazon.com Inc, involves large distribution channels in order to distribute the products in large number of customers as well as share information regarding the products that are to be newly launched in the global market (Johnson, et al., 2013). The supply chain management of Amazon.com is efficiently carried out so as to meet the demands of the customers in global market. 4.3 Strategic Plan along with resource implication Actions/Tasks Responsibility Timeline Resources Challenges Accomplishment Establishment of Strategic Planning Committee To select efficient managers First 2 months Efficient managers Inefficient and reluctant managers Strong planning committee Reviewing the existing Plans Managers need to go through the plans Next 3 months Efficient managers Inefficient and reluctant managers Improvement of the existing plans Defining the mission of the Organization Managers need to undertand the mission of the organization 1 month Efficient managers Incapability of the managers to understand the mission Understanding the mission Defining the issues Understanding the problems faced in achieving those objectives 1 month Efficient employees, suppliers and dealers Inefficiency of the employees Dealing with the issues successfully Establishing the goals Meeting the demands of the stakeholders 1 month Efficient employees Inefficiency of the employees Efficient strategy implementation to achieve the goals Working in order to achieve the goals Understanding the strategies to be under taken so as to achieve the goals 2 month Efficient employees Inefficiency of the employees Successfully creating the brand image in the global market Evaluation of the success Measuring the key success factors 1 month Stakeholders Unable to identify the key success factors Satisfaction of the customers Start planning for next year Repeating the process for next year Last month Efficient managers Inefficient and reluctant managers After the successful implementation of current years plan (Source: Author’s Creation) Task 3 5.1 Comparison of Core Organizational values Every organization needs to follow the core organizational values in order to enhance its performance in the global market. There are several aspects such as ethical, cultural, environmental, social and business factors that Amazon.com Inc focuses on (Johnson, et al., 2013). The ethical, social as well as the cultural aspects involve providing proper customer services in order to maintain the long-term relationship with the customers. Amazon.com seeks to achieve the feedback from the customers and the company enables the users to communicate with their customer service agents in case of any issues related to the placement of order (Johnson, et al., 2013). The marketing and the promotional techniques are related to the cultural backgrounds of the target customers and their preference patterns. Moreover, Amazon needs to focus on the information shared regarding the products they sell. This is part of the ethical aspects that they need to take care off in order to create a brand image in the global market. Many of the customers prefer to gather information before the actual purchase of the products. The invention of the Kindle by Amazon.com is an environment friendly initiative undertaken by the company. It reduces the wastage of paper and also satisfies the book lovers (Johnson, et al., 2013). The objectives of the organization are to grow into a market leader with the help of its e-commerce business and the core organizational values followed by Amazon help it to achieve the objective. 5.2 Vision and Mission statement of Amazon The vision and mission statement of Amazon are part of the planning process that is undertaken by the company. The mission of the company is to expand its business as well as satisfy the customers with high quality products at affordable rates. The vision statement of Amazon would be that the company plays the role of a market leader and the world’s largest customer-centric e-commerce business organization. 5.3 Future Management objectives of Amazon The future management objectives of Amazon comprises of the following statements. To improve the quality of the products offered by the company. To serve the customers at low costs such that they are able to purchase more products. To be customer-centric business organization and manufacture the products based on the feedbacks collected from the customers. To bring in technological innovation as well as improve the quality of services offered to the customers. To measure the performance of Amazon in terms of the customers. 5.4 Measures for Evaluating Strategy Plan The evaluation of the success of a strategic plan is based on four factors as follows. Efficiency Measures- This measure is implemented as productivity and cost effectiveness are considered as the ratio of output per unit input. It measures the efficiency of the strategic plan within the organization (Johnson, et al., 2013). Outcome Measures- These are used to measure the outcome of the strategic plan as constructed by the researcher. The implementation of such plan derives a suitable outcome that is to be measured in order to determine the effectiveness, Quality measures- This include the effectiveness, reliability, accuracy, courtesy, responsiveness, competence and compliance of the activities that are performed by the organization in the expanding its business (Johnson, et al., 2013). Project measures- This involves the effectiveness of the newly launched products and the extent to which Amazon has created the brand image in the global market. These measures help in evaluating the strategic actions undertaken by the organization and also predict its future growth prospect. 6.1 Schedule for the implementation of strategy plan The Gantt chart indicates the activities that are to be undertaken by the managers of Amazon.com, Inc within 1 year for the successful implementation of the strategies. 6.2 Dissemination process in order to gain commitment from stakeholders The main motive for developing the dissemination strategy is to provide knowledge to the stakeholders about the goods sold by Amazon.com, Inc. Three types of dissemination strategies can be undertaken so as to gain the commitment from the stakeholders such as dissemination for awareness, dissemination for understanding and dissemination for action (Johnson, et al., 2013). The customers of the organization are considered as the stakeholders of the organization and awareness is created among the customers regarding the newly launched products in the global market. The awareness is created with the help of social media such that they are interested in purchasing the products in the global market. Moreover, the internal stakeholders such as the managers and the employees are trained in order to make them understand the requirements of the customers (Johnson, et al., 2013). The improvement in the performance of the organization would satisfy the employees and the managers and the company would be able to ensure their retention. The performance of the organization would also satisfy the government and the suppliers of Amazon and they would be interested in investing more on the company. The dissemination process would create awareness among the important stakeholders of Amazon.com and they would be ready to take actions for the betterment of the organization (Johnson, et al., 2013). 6.3 Evaluation of the strategy plan after implementation Monitoring and evaluating the strategies of the organization is necessary in order to enhance the performance of the organization. Monitoring also helps in the decision making process of the organization related to the further strategies to be undertaken by Amazon.com (Johnson, et al., 2013). The progress of the organization is tracked at regular intervals. Moreover, the company has hired some of the efficient managers who are able to provide advices for the betterment of the company. The monitoring as well as evaluation techniques involves the following elements. 1. Report to other- This involves a purpose for carrying out the monitoring as well as evaluation of the strategies implemented. 2. Involvement of the stakeholders- The stakeholders are involved in the process of monitoring as well as evaluation. Communication with the stakeholders would indicate whether they are satisfied with the performance of the organization or not (Johnson, et al., 2013). 3. Monitor the progress- The performance of Amazon.com is tracked based on the feedback of the customers. Monitoring of the strategies also involves the risk management within the organization and also ensures that the customers are served with quality products. 4. Review regularly- The strategies implemented by Amazon.com are evaluated regularly in order to take further steps related to the launch of new products and attract the customers in the global market (Johnson, et al., 2013). 5. Evaluate the outcomes- The outcomes of the strategies are based on the brand image created in the international market and the increase in customer base. Moreover, survey is conducted on the customers by distributing the feedback sheets and the data is analysed using statistical tool in order to derive final conclusion (Johnson, et al., 2013). Reference List Cummings, S. and Angwin, D., 2015. Strategy Builder: How to create and communicate more effective strategies. New Jersey: John Wiley & Sons. Johnson, G., Whittington, R., Angwin, D., Regner, P., Scholes, K. and Pyle, S., 2013. Exploring strategy: text and cases. US: Pearson. Appendix Appendix 1 Figure 3: Annual Revenue of amazon.com, Inc. (Source: Cummings and Angwin, 2015) Appendix 2 Figure 4: Comparison of Amazon and its competitors (Source: Cummings and Angwin, 2015) Read More