Yahoo and Amazon, Building a Competitive Advantage - Essay Example

Yahoo and Amazon: Building a Competitive Advantage Yahoo and Amazon: Building a Competitive Advantage Histories of Amazon.com and Yahoo.com Amazon and Yahoo are two major internet retail players that have revolutionized online shopping among other applications used within the internet. The two companies have emerged as major competitors whose business functions serve various departments in the United States and beyond. Amazon is considered as the pioneer company in online retail business having been established in 1994 in Seattle Washington. The company initially offered online books but later adopted a massive diversification strategy that enabled it to begin selling other products such as DVDs, movies, videos and online music streaming. The company has adopted a strong interactive website that serves different countries in the world based on the market needs and sociocultural factors (Kannan, 2013). As a result, Amazon has a website for the United States, its domestic market and other global markets such as the United Kingdom, France, Germany Brazil, china and India among other developed markets. Though other African countries lack customized Amazon website, the company entered the market by facilitating international product shipping to different destinations. This has enabled the company to serve various markets across the globe including emerging and developing economies in Africa, Asia and South America (Kannan, 2013). In reference to the Amazon River, Bezos believed that Amazon had the possibility to grow into one of the largest online retail shops in the world. To grow and become a major market force, Amazon acquired a number of companies including Planet All, Alexi internet and other online music stores. Two electrical engineering graduates who first developed an internet search guide in the names conceived the idea of Yahoo at the Stanford University in the United States in 1994. The duo later changed the search engine into Yahoo! By creating a website a year later and intensifying their marketing activities in different parts of the United States. Yahoo witnessed a rapid growth in the 90s, which contributed to an increase in share value in the country and online users. However, major companies like Microsoft tried an acquisition bid on the company, the board of management declined and this gave it more footage and market confidence among new and old online users (Kannan, 2013). Core business of Amazon and Yahoo Amazon is known as the largest online retail company in the world and supplies various products to its online customers including DVDs, music CD, consumer and electronic products among others. The company offers various cosmetic and health products, groceries, kitchenware and among other fashion products like jewelry. Amazon has also created a platform that allows its customers to access various digital contents and even donate to various organizations engaged in digital content production. In 2008, the company also launched Amazon games following the successful acquisition of reflexive entertainment, a company that specialized in the development of games for both Microsoft computers and Mac PCs. Yahoo on the other hand has emerged as a major player in the development of online digital information and tracking services. The company has the ability to acquire essential information about its users and employ such data in designing its products or selling to other online companies. Yahoo is also focused in online communication through Yahoo messenger and Yahoo mail platforms, which offers free, email services to users across the globe. The mail company offer unlimited storage services to its users, a decision that has enabled it to compete favorably with other mail providers such as Google (Katz & Jones, 2001). Yahoo also has other digital contents such as Yahoo sports, finance, music, movies, weather, news and games, which can be accessed by users free of charge. The company also developed Yahoo mobile to tap on the emerging mobile market, which has been attributed to the development of internet-enabled mobile phones. Finally, Yahoo has specialized in online advertising through Yahoo search marketing tool, which a number of companies have used to advertise their products to over a million Yahoo users. Key Yahoo and Amazon strategic differences Yahoo and Amazon have different strategic management approaches and this has contributed to the success of the two companies in different proportions. Amazon is celebrated today due to the strategies that Bezos adopted and continue to introduce into the company as its chief executive officer. Amazon has adopted cost leadership strategy that has given it significant competitiveness as compared to other industry players such as EBay. Cost leadership strategy is developed to enable organizations produce more goods and services that are attractive to the target market as compared to the competitor. Amazon has therefore adopted a strong diversification strategy in order to ensure that the cost leadership strategy succeeds in the face of strong competition. The company also achieves this through a reduction in the cost of marketing its products within its online platform, a process that has enhanced its position in the global retail market. Amazon has also committed itself to the delivery of high quality and superior products and services to its consumers in order to shield them from competitors. Amazon product delivery process is reliable, convenient and the cost of shipping is significantly subsidized, a practice that has enhanced its position in the global retail market. The brand reputation of the company has been attributed to its high quality products and services to its online customers (Tehrani, 2014). Amazon has over the years embraced and perfected acquisition strategy that has enabled it to introduce new products into the market. Amazon has acquired new firms and businesses, which introduce new products into the market. This acquisition strategic acquisition has enabled the company to introduce cloud computing services and other customer relations management skills. During the late 90s and early years of this century, the company acquired various firms that offered online digital contents and videos, a process that enabled the company to introduce more products through its brand name. This has given Amazon significant competitive advantage as compared to other firms in online retail industry such as EBay. Yahoo is the main competitor to Google, a popular search engine with significant market control and capitalization as compared to other firms in the industry. Analysts believe that Yahoo has been forced into adopting a number of strategies after the company’s stocks depreciated. One strategy that has had significant success at Yahoo is decentralization as a way of reducing market implications on the stability of its stock price (Jurado, 2014). Carol Bart who replaced Wang after a failed takeover bid by Microsoft brought into the company several years of experience in managing online retail companies. To maintain a strong online base for the company, Carol introduced decentralization strategy as a way of reducing the implication of strong competition from emerging companies such as twitter and Facebook. He decentralized authority in the company as a way of increasing control of its different units and eliminating the high operational cost (Tehrani, 2014). Roles such as publishing and advertising were however centralized under the responsibility of a single executive, a decision that is believed to have created coherence and growth of the marketing department at Yahoo. When decentralization failed to achieve the primary goal, the company adopted cooperation with other firms such as Microsoft, which allowed the company to use Bing, its search engine. The company has also sold most of its non-core assets to reduce the operational cost in the company and give it financial strength for strategic acquisition (Katz & Jones, 2001). Distinctive competence of Amazon and Yahoo that affect strategic decision making The success of Amazon and Yahoo strategies has been attributed to their distinctive competencies and abilities, which have enabled them to pursue various goals. Amazon and Yahoo have key uniqueness that their customers can easily identify with and follow through their products and services. While other new entrants into online retail and businesses have adopted a ‘me too’ attitude, Yahoo and Amazon have distinguished themselves as major players in the industry. This has been possible through the development of value of uniqueness, which its customers can see in their products and services (Jurado, 2014). The products and services that Amazon has rolled out into the market are relevant to the challenges and needs of the consumers. By giving its customers products and services that influence and fulfill their desires, Amazon has been able to implement its strategic decisions. Relevance as a distinctive competence increases the competitive advantage that Amazon and Yahoo enjoy as the customers’ needs are fulfilled (Bondarouk & Olivas-Lujan, 2013). To remain relevant and make significant progress and growth, such companies offer lower prices but at a compromised quality. Amazon and Yahoo have developed strong products and services that are difficult to imitate or even copy by other small and emerging companies. This has enabled the companies to implement their strategies and improve their competitiveness in the market unlike new and emerging companies in the same business line (Jurado, 2014). Most of the products and services offered by Amazon and Yahoo have a large breadth of application, which enable them to be applied in various other niches in the market. By increasing the size of its product niches, Amazon and Yahoo have increased customer loyalty, which has increased its market control and presence in various parts of the world. Amazon and Yahoo have also developed a strong architectural background and support for their online business platform. This has enabled Amazon to adopt cloud computing at a time when security to personal information of the customers has been threatened by hackers (Jurado, 2014). Amazon has been feted for its exemplary and excellent customer service, a major core competency that has given it significant dominance of the market. Complaints emerging from products sent to customers by the company are urgently addressed, a situation that has enabled the company to remain on top of the internet retail game (Tehrani, 2014). Functional level strategy for Amazon and Yahoo The internet retail business has companies competing based on the capabilities, a situation that forces Amazon to ensure that its critical departments remain influential. To compete favorably, both Amazon and Yahoo must adopted a number of functional strategies to enable it maintain its market influence. Amazon and Yahoo should improve its economies of scale strategy in order to ensure that its products prices remain relatively low despite the high quality. This will make the two companies major market forces which other small and new entrants will not able to compete with favorably (Tehrani, 2014). Amazon has over the years embraced and perfected acquisition strategy, which has enabled it to introduce new products into the market. Amazon has acquired new firms and businesses, which introduce new products into the market. This acquisition strategic acquisition has enabled the company to introduce cloud computing services and other customer relations management skills. During the late 90s and early years of this century, the company acquired various firms that offered online digital contents and videos, a process that enabled the company to introduce more products through its brand name (Bondarouk & Olivas-Lujan, 2013). This has given Amazon significant competitive advantage as compared to other firms in online retail industry such as EBay. Yahoo also has other digital contents such as Yahoo sports, finance, music, movies, weather, news and games, which can be accessed by users free of charge. The company also developed Yahoo mobile to tap on the emerging mobile market that has been attributed to the development of internet-enabled mobile phones. References Bondarouk, T., & Olivas-Lujan, M. R. (2013). Social Media in Strategic Management. Bingley, UK: Emerald. Jurado, R.M. (2014). Search engine liability arising from third parties infringing content: a path to strict liability? Journal of Intellectual Property Law & Practice, 9(9), 718. Kannan, V. R. (2013). Strategic Management in the 21st Century. Santa Barbara, Calif: Praeger. Katz, R. S., & Jones, R. A. (2001). National Boundaries in Cyberspace? Yahoo! v. LICRA. Journal of Internet Law, 5(3), 1. Tehrani, S. (2014). Welcome to the Amazon: Leading Online Retail from Local Tax Avoidance into Your Backyard. Tax Lawyer, 67(4), 875-908. Read More