Amazon: Corporate and Business Level Strategy - Case Study Example

Amazon: Corporate and Business Level Strategy Introduction Organizations have different levels of strategies based on the strategies’ focus, and the part of the organization that creates it. Corporate and business matters are not the same and are handled differently. For this reason, every organization has to have a corporate level and business level strategy. Corporate level strategies deal with an organization as a whole. They also examine the actions of the organization, as well as decisions made regarding issues such as diversification, addition of new products and removal of certain products from the product portfolio and partnership with other companies among others (Furrer, 2011). The opinions of shareholders are essential in corporate decisions. For this reason, the opinions and expectations have significant impact on corporate level strategies. On the other hand, business level strategies deal with the company as a business and how it relates to customers and other businesses. At this level, organizations seek to create value for their customers, while operating at the least cost possible. Decisions made at the business level enable an organization to stay competitive in the market amidst other competing firms in the industry Gregorio, (Ireland, Hoskisson & Hitt, 2006). Industry standards, competitor advantages and pricing models all play significant roles in business level strategy. This paper will discuss the corporate and business level strategies of Amazon.com, Inc and examine how the company’s structure and control systems match its strategy. Corporate Level Strategy According to Gregorio (2012), Amazon.com recognizes the significance of offering a wide range of products for customers. Customers prefer a shopping platform that offers a wide variety of products of services. As part of the company’s corporate level strategy, Amazon.com has increased the number of products in its product portfolio, which shows adaptable the company can be. Initially, Amazon started as a book store, and its first online store stocked books only. However, as the e-commerce business developed, the needs of the market changed. Amazon took advantage of the opportunities to offer other product such as music and videos, in addition to books. With time, the company has diversified its portfolio to include a wide range of electronics such as computers, cameras and mobile phones among others, watches, clothes, shoes, home appliances, software solutions and video games among many more. As technology advances, Amazon.com has not been left behind. The company acknowledges that customers demand e-books which can be stored on their computers for easier access. For this reason, the company has adapted its old business model to fit this new technology. This strategy ensures that customers have a large variety of items from the same store. This strategy increases earnings for the business, which in turn increases the wealth of shareholders. The company has been entering into various business partnerships as part of its corporate strategy. These partnerships are meant to increase the market share of the company through partnerships with companies that specialize in various products (Gregorio, 2012). This increases the number of products available to customers. Amazon.com is always willing to partner with companies that have proven their expertise on various products. This acts as a guarantee to customers that the products are of high quality. The company has a vast ecosystem of partners with low cost contractual agreements which reduces time wastage in forming partnerships. Examples of partnerships include zappos.com, which is a shoe company and drugstore.com, which is an online drug store. Business Level Strategy According to company’s mission statement, Amazon.com strives to become the most consumer centric organization in the whole world where customers can find and discover basically anything they would like to purchase online. They seek to achieve this mission by offering customers a vast selection of goods, low prices and convenience shopping among others. As part of the business level strategy, Amazon.com focuses on customers. The customer is the most important assets for Amazon since the business continuity depends on the availability of customers. This strategy seeks to ensure that the company does not only get customers, but it is able to maintain long term and fruitful relationships with them (Gregorio, 2012). In line with this goal, Amazon.com tries its best to make shopping as convenient as possible, in addition to charging low prices and making everything faster for customers. According to the company, this is exactly what customers look for when shopping and the company tries as much as possible to offer it. Amazon maintains prime memberships that seek to encourage customers to continue being loyal to the company. The company believes that each customer is important and he or she should be a regular customer after shopping for the first time. For these reason, the company offers incentives to customers in order to establish loyalty. The company offers free shipping for customers within the US, as well as one click online ordering process. This attracts customers since they do not need to fill out many forms to order a product. The mix of competitive pricing, free shipping and a vast selection of products keep customers coming back to Amazon.com. Amazon.com also focuses on the shopping experience of customers. The company perceives the process of selling and buying as a service. The company appreciates that customers who have positive shopping experiences will always come back. This strategy eats into the profits of the company but Amazon internalizes such a cost in order to keep customers coming. The fact that this strategy reduces the profits for shareholders makes it more of a business strategy rather than a corporate level strategy. Would it have been a corporate level strategy, shareholders would certainly oppose the strategy. In the same way, Amazon.com is willing to slash its prices as much as possible in order to attract more prices. The benefits of this strategy are long term as customers remain loyal to Amazon. Cutting into the profits of the company in the short term ensures that the company achieves a large market share in the long run. According to Gregorio (2012), Amazon enjoys economies of scale since the company is huge and serves a large number of customers around the world. For this reason, it can easily get its products to customers around the world much faster since it has centers all over the globe. This makes Amazon.com a difficult company with which to compete, since its supply chains are efficient, which makes excellent product availability. Relevance of Business and Corporate level strategies The strategies of Amazon.com are in line with the company’s structure and control systems. The diversified product portfolio means that the company has different departments dealing with the various product lines. For this reason, a centralized corporate structure would not be effective. Amazon.com maintains a divisional structure. This structure allows for departmental head to make decisions based on the requirements of their specific departments. These decisions are made independent of the top management. The heads of major departments or regions are responsible for the organization’s performance in their departments or regions. Such a corporate structure allows the company to make the best out of its corporate and business strategies. The North America division is divided into 5 departments; operations, seller services, sports and home improvement, toys and Amazon publishing and music/video. The overseas division has three departments; Europe, China and India. This structure and control system allows the company to focus on the needs of consumers more closely. For instance, the company has an oversea division has three major departments. Each of these departments has a president, who is in charge of operations in that region. This allows the company to focus on customers more closely. The preferences and purchasing patterns of customers in different geographical locations vary. For instance, the consumption pattern in China is different from that in Europe. A divisional structure allows the presidents of these regions to focus on such unique preferences and maximize earnings. This would not be the case if decisions were made at the head office. Having outlets being managed from different geographical regions makes Amazon.com a global company. The best corporate structure for global companies is a divisional structure since it allows for flexibility and efficiency of the management (Furrer, 2011). For instance, if incentives provided do not work for a given region, then the head of that region can decide to use other incentives that will attract customers from that region. In the same way, depending on the amount of business costs, managers can use region specific advantages in order to achieve the goals of the business strategies. References Furrer, O. (2011). Corporate level strategy theory and applications. London: Routledge. Gregorio, L. (2012).  Corporate and Business Level Strategy. Digication e-Portfolio. Retrieved November 18, 2013, from https://stonybrook.digication.com/lou_gregorio/Corporate_Level_Strategy Ireland, R. D., Hoskisson, R. E., & Hitt, M. A. (2006). Understanding business strategy: concepts and cases. Mason, OH.: Thomson Higher Education. Read More