Corporate Strategy in the UAE Context - Amazon - Case Study Example

Corporate Strategy in the UAE Context Name Institutional Affiliation Abstract The e-commerce industry is very dynamic because of technological advancement, globalization and changing consumer wants. This essay examines the strategy adopted by Amazon in consolidating its position as the market leader in e-commerce. The strategy is based on the trends in the e-commerce industry particularly the emerging market in the Middle East. The essay examines the nature of the industry and the inherent challenges, both past and present; and the consequences resulting from those challenges. This becomes the basis of discussing the strategic challenges facing Amazon in the future. The essay compares the approaches taken by different organizations in addressing each challenge. Evaluation of the effectiveness of strategies will focus on innovation, sustainability, and competition. The report will reflect the importance of the relevant strategic priorities including the UAE Vision 2021 and the Abu Dhabi Vision 2030.With regard to the learning outcome; the key performance indicators utilized include knowledge, self-development, and role in context. The essay ends by recommending the strategy that can be adopted by Amazon to confront future strategic challenges. Corporate Strategy in the UAE Context Introduction Competition is a ubiquitous phenomenon in the corporate world. However, there are instances whereby continuous corporate growth is the only strategy used by companies to sustain market share price (Stacey, 2011). One such company is Amazon which started as a mere online bookstore has emerged to be the best global e-commerce platform globally through its disruptive innovation strategy. By definition, the disruptive innovation theory refers to a situation whereby an infant industry concentrates on abandoned sectors and revolutionizes them prompting the market to sway towards the direction of these neglected sectors (Kuklinski, Moser, and Callarman, 2014). The acquisition of Souq.com by Amazon presents an instance whereby acquisition is used to venture into new markets to stimulate exponential growth through disruptive innovation. Arguably, this acquisition exposes Amazon to the favorable corporate strategies in the UAE while at the same time introducing the latter to global foreign markets. Therefore, the UAE presents unlimited opportunities for growth through favorable legislation, advanced technologies, and diversification opportunities. Literature Review Organizational growth is always a prime factor considered by any business. To achieve this kind of growth, organizations need to remain steadfast in implementing acceptable decisions that not only sustain the business but are easy to implement as well. Arguably, competition is a fundamental determinant of organizational growth. For example, although Amazon is the largest e-commerce retail store by revenue, it is facing stiff competition from iconic brands including JD.com, Macy’s and Walmart. Sigalas and Economou (2013) contend that the ability of a firm to attain competitive advantage is contingent upon the value that it brings to consumers in the market. According to Hinterhuber (2013), the attainment of a competitive advantage should not be the ultimate goal of a company. Rather the company should strive to consolidate the short term gains and produce more for long-term success. The e-commerce industry is extremely dynamic. The dynamism in E-commerce emanates from both internal and external forces (Gupta and Levenburg, 2012). For instance, competition and globalization are external while strategy and technology are internal forces for change in the e-commerce industry. Before picking on a response strategy, the company will need to assess the situation to determine the adjustment to make. According to Christensen and Rosenbloom (2000), acquisition of a foreign company is strategic because it enables the acquiring company to access the emerging global markets more quickly. Besides, it can potentially position the company for future opportunities. However, Kipping and Westerhuis (2012) maintain that the success of this corporate strategy will mainly depend on the due diligence process. The acquiring company must be able to examine the strategic, marketing, and operating and investment fits of the target company (Kamukama, 2013). This will determine the viability of the acquisition. Amazon Case Study In the case of Amazon, the company was founded as an online book retailer which later progressed to become the largest retailer in the U.S. Over the years, however, Amazon has incurred serious trouble competing in the online business. The company has for long undertaken significant investments to top the market as the best online retailer. As such, this has been achieved through product differentiation, diversification, acquisition, and internationalization. However, innovation has been dubbed as the best strength if Amazon as compared to the rest. In his research, Leitner (2014) is quick to note that, companies that incur rapid growth are compelled to uphold the same trend just to prevent their equity from subsiding. In essence, this means that the success of Amazon is measured by its growth rate. Therefore, despite the inadequate capital it has, the company is forced to invent and sustain innovations now and then. Amazon’s has dominated the European Market to a saturation point. As such, the company has achieved infinite growth in this market thus calling for new strategies to achieve growth. In conjunction to this, Amazon resorted to acquiring Souq.com to sustain infinite growth. Due to the corporate strategies in the UAE, the online retailer chose to undertake an acquisition strategy as opposed to entering the market under its name. Arguably, this can be attributed to the start-up cost the company would incur trying to position its brand in the UAE. In support of this, Balakrishnan (2015) asserts that entering a new market requires a lot of time, investment, and an incremental mindset that makes it possible to adopt new strategies. The UAE market is laden with opportunities including a federal government that supports commerce, trade security, and established logistics. Therefore, both Amazon and Souq.com stand to benefit from this acquisition. Arguably, Amazon stands to benefit a lot from the acquisition of Souq.com. To start with, the company will enjoy the low prices already set by Souq.com in the UAE. Moreover, it will enjoy a refined fulfilled operation characterized by well-established logistics which ensure that orders are delivered on time. As such, this is Amazon’s prime focus as an online retailer. Also, the company will enjoy an established network involving customers and suppliers who served Souq.com before it was sold to them. Arguably, an established network assures a company of continuous trade activities (Gupta and Levenburg, 2012. Also, the company will leverage Souq.com digital platform called Payort, which is the hallmark of e-commerce financing in UAE. This corresponds to Abu Dhabi's vision 2030 which seeks to make the Arab business environment more technologically advanced. Another significant benefit which Amazon will enjoy from the acquisition of Souq.com is Cash on Delivery (COD). For many online retailers, COD is a major challenge. However, it constitutes one of the successes of Souq.com. As such, the UAE is a safe market thereby leading to the prevalence of COD terms. Therefore, Amazon may not only leverage these payment terms in the UAE but could also implement them back in its domestic market whereby the use of VISAs for online purchase is preferred. As such, this offers Amazon an opportunity for growth in its domestic markets since customers without access of VISAs will still be able to purchase products online. Arguably, the UAE offers Amazon and unlimited opportunity for growth. Amazon will benefit from the wide range of products sold by Souq.com in the UAE. As such, this does not only make it easier to align Amazon’s current operations to those of Souq.com but also propels the company in fulfilling an integrated business environment as speculated in the Abu Dhabi vision 2030. Through the acquisition of Souq.com, UAE will benefit from the diversification of products while maintaining the local value of Souq.com in among Arab nationals. Also, the infinite inventory lowers the cost that would have otherwise been incurred had Amazon penetrated the market as a new entrant. Additionally, entering the UAE through the acquisition of a company that conducts activities similar to Amazon would offer a better chance for Amazon to introduce its products into this market, thereby instigating exponential growth. As mentioned earlier, the UAE offers unlimited opportunities for diversification. By acquiring Souq.com, Amazon stands a better chance of introducing Kindle Oasis, Amazon Tap, and Amazon Echo Dot in the UAE. Moreover, the company will be able to leverage this platform to introduce Amazon Prime Video. Through this acquisition, Amazon offers a great opportunity for the UAE to leap into global markets. As such, products from the UAE will have a higher chance of being sold to other nations across the world. However, such a venture requires embracing advanced technologies and new distribution strategies. Arguably, the UAE largely offers these opportunities for Amazon. For instance, the fact that the UAE embraces savvy technology would enable Amazon to introduce the concept of ‘anticipatory shipping’ in the region. As such, this would reduce the time of delivery and the costs accruing to logistics. Therefore, by acquiring Souq.com, Amazon enhances the growth of the UAE across global markets. In essence, the acquisition of Souq.com by Amazon is an instance of disruptive innovation. Through the mutual benefits mentioned above, the merger is expected to create an uproar in the E-commerce industry. As such, this will give them sustainable competitive advantage and undoubtedly make Amazon the best online retailer globally. Our Solving Strategy An advanced strategy for Amazon to sustain and increase its market share would be through differentiation. One of the problems the company is currently facing is selling products similar to what other retailers are selling in the market. Amazon could achieve this through many ways. To start with, the company could use proprietary technology to license its products. Moreover, the company should use better content on its website. The reason for this is that content is the first thing noticed by a customer and is responsible for creating a lasting impression in the minds of consumers. Additionally, Amazon should enhance its brand by offering exceptional customer care services which attract customers. Although the company sells products of different types, it should offer extensive collections of the same product to give customers a wide array to choose from. In essence, this kind of product differentiation is imperative in gaining competitive advantage. As such, this is so because differentiation reduces the directness of competition and creates room for consumers to try out new products. Moreover, it creates a lasting impression of a brand among customers and enhances retention. Recommendation In my opinion, Amazon should strive to consolidate substantial market share in the UAE through Souq.com. Arguably, this is because the UAE offers an accommodating corporate environment inclusive of lenient federal regulations to support trade, savvy technology, and unlimited opportunities for diversification. The fact that Amazon is more inclined to enhancing growth as opposed to profit margins makes this acquisition a noble move in achieving the company’s mission statement to be the best E-commerce platform globally. On its part, Souq.com can strengthen its market base in UAE by investing in a savvy SEO strategy to generate more traffic. The company can also develop an application that can allow customers transact on their phones for convenience. Diversity is an important tool for risk management (Kamukama, 2013). For instance, besides online retail, Amazon deals in cloud computing. The extra stream of income adds to the net worth. Finally, Souq.com should consider starting affiliate programs to generate third-party sales through referrals. Conclusion In summary, the UAE offers unlimited opportunity for growth. Therefore, the recent acquisition of Souq.com by Amazon does guarantee the buying company exponential growth. As such, Amazon will benefit from this acquisition through the established logistic channels, a ready market balanced by adequate buyers and suppliers, and a government that is inclined towards trade development. Also, the company will benefit from the savvy technology in the UAE. Conversely, the UAE—through Souq.com—will benefit from diversification, advanced technology, and exposure to foreign global markets. Therefore, the acquisition of Souq.com offers Amazon an opportunity for exponential growth due to the favorable corporate strategies presented by the UAE market. References Balakrishnan, M.S. (2015). "Americana Group: KFC in Mecca,” Emerald Emerging Markets Case Studies. Christensen, C. M., & Rosenbloom, R. S. (2000). Explaining the attacker's advantage: Technological paradigms, organizational dynamics, and the value network. Research Policy, 24(2), 233-257. Retrieved from https://doi.org/10.1016/0048-7333(93)00764-K. Gupta, V., & Levenburg, N. (2012). Cultures, ideologies and family businesses. Journal of Family Business Management, 2(1), 57-75. Retrieved from https://doi.org/10.1108/20436231211216420. Hinterhuber, A. (2013). Can competitive advantage be predicted? Towards a predictive definition of competitive advantage in the resource‐based view of the firm. Journal of Management History,51(4), 795-812. Retrieved from https://doi.org/10.1108/00251741311326572. Kamukama, N. (2013). Intellectual capital: company's invisible source of competitive advantage. Competitiveness Review: An International Business Journal, 23(3), 260-283. Retrieved from https://doi.org/10.1108/10595421311319834. Kipping, M., & Westerhuis, G. (2012). Strategy, Ideology, and Structure: The Political Processes of Introducing the M-form in two Dutch Banks (Vol. 29, ISSN: 0742-3322). Emerald Group Publishing Limited. Kuklinski, C., Moser, R., & Callarman, T. (2014). Managing dynamic business environments: India’s future automotive industry. Journal of Indian Business Research, 6(4), 309-331. Retrieved from https://doi.org/10.1108/JIBR-06-2014-0039. Leitner, K.H. (2014) "Strategy formation in the innovation and market domain: emergent or deliberate?” Journal of Strategy and Management, 7(4), pp. 354 – 375. Sigalas, C., and Economou, V.P. (2013) "Revisiting the concept of competitive advantage: Problems and fallacies arising from its conceptualization,” Journal of Strategy and Management, 6(1), pp. 61 – 80. Stacey, R. D. (2011). Strategic Management and Organisational Dynamics: The Challenge of Complexity to Ways of Thinking about Organisations (Sixth ed.). Pearson Education Limited. Read More